IND-510-02: Why Your E-File Was Rejected and How to Fix It

E-filing tax returns offers convenience and speed but is not without its challenges. A common issue many filers face is the rejection of their e-filed return, which can be frustrating and leave taxpayers wondering what went wrong. Understanding the reasons behind these rejections is key to ensuring a smooth filing process and avoiding unnecessary complications.

Mismatched Filing Information

One frequent reason for e-file rejection is mismatched filing information. This happens when the data on the tax return does not align with the records held by the Internal Revenue Service (IRS). Discrepancies in Social Security numbers, names, or birth dates can trigger a rejection. Ensuring that the information on your tax return matches exactly with your Social Security card and other official documents is essential. Even minor errors, like a misspelled name or an incorrect digit, can lead to complications.

Mismatches can also involve financial data. If the income reported on your tax return doesn’t match the information provided by your employer on Form W-2 or 1099, the IRS will flag the inconsistency. This might happen if an employer submits a corrected W-2 after you’ve already filed or if you enter the wrong figures. Double-checking all income statements and ensuring they are accurately reflected in your return can help prevent such issues.

Conflicting Prior Return Records

Conflicting records from previous returns can also hinder the e-filing process. This often occurs when discrepancies exist between the current year’s tax return and prior year filings. For example, if amendments were made to a prior return but the IRS database hasn’t been updated to reflect these changes, it can result in rejection. Taxpayers should ensure that any amendments or corrections from previous years are fully processed before submitting a new return.

Carryovers of credits or deductions from previous years can also cause conflicts. For instance, if you are carrying forward a capital loss or a Net Operating Loss (NOL) but the IRS records don’t align with your reported amounts, rejection may occur. Accurate documentation and record-keeping are critical to ensure that carryovers match IRS records.

Insufficient Identification Verification

Insufficient identification verification is another common reason for rejection. This happens when the IRS cannot confirm the filer’s identity due to mismatched or missing data. Taxpayers who have been victims of identity theft are required to use an Identity Protection PIN (IP PIN), a unique six-digit code issued annually. Entering this code accurately is essential for successful filing.

The IRS has also implemented advanced identity verification protocols, such as multi-factor authentication (MFA), which requires both a password and a secondary verification step, like a code sent to a mobile device. Taxpayers must ensure their contact information is current and that they have access to the devices linked to their IRS accounts. While these measures enhance security, they can present challenges if not managed carefully.

Unresolved Tax Obligations

Unresolved tax obligations can significantly impact the acceptance of an e-filed return. Outstanding balances from prior years often trigger additional scrutiny or penalties. The IRS may employ collection strategies such as levying bank accounts or garnishing wages to address unpaid taxes. These penalties, including failure-to-pay penalties and interest, can quickly add up, compounding financial difficulties.

Taxpayers should address unresolved obligations before filing a new return. Options like an installment agreement, outlined under the Internal Revenue Code (IRC) Section 6159, allow for structured repayment plans. Programs like the IRS Fresh Start Program can also provide relief, offering higher thresholds for lien filings and expanded access to installment agreements for those struggling with significant tax debt. Proactively managing tax obligations can help ensure compliance and prevent further complications.