What the IRS does if you get your tax return wrong

On Behalf of | Jul 21, 2017 | Tax Crimes

Residents of Connecticut may make genuine errors in the process of filing their income tax returns, including mathematical mistakes and delays. However, it is important to address those mistakes expediently, so that the Internal Revenue Service does not view them as tax crimes.

When you make a mathematical error, the IRS will typically eschew formal action against you and instead just send you a polite letter. That letter may tell you that they automatically adjusted your taxes, or ask you to confirm information so that adjustment can be made.

Letters of this nature do not require an audit. If you get one, it is best to just review your calculations and communicate your understanding of the correct numbers to the IRS as soon as possible. If you are unsure, a tax attorney can help you to make sure that you get everything right.

It’s worth noting that mathematical errors go both ways. If you made one, you may owe more than you first believed, but you may owe less. You may even be due a refund. Therefore, the change in your total can be good news.

However, if you make a substantial understatement on your tax return, you may owe a substantial penalty. If you understate the tax that you owe on your tax return by $5,000 or more, or by an amount that is 10 percent or more of the tax that you owe, you can expect to have to pay the full amount plus a twenty percent penalty.

You can also incur a 20 percent penalty if you are found culpable of negligence. This includes entering any items of your income tax return that you cannot substantiate. You can appeal claims of negligence with the IRS within 30 days.

Willful and deliberate attempts to avoid paying your income taxes may result in being accused of fraud. It’s essential to have experienced legal guidance if you’re facing these allegations.

Source: The Nest, “Does the IRS Forgive Honest Mistakes?,” John Csiszar, accessed July 21, 2017