What Happens If I Did My Taxes Wrong?

Errors on tax returns are common, stemming from honest mistakes or overlooked details. The Internal Revenue Service (IRS) recognizes that errors happen and has established clear procedures for taxpayers to correct submitted returns. Understanding these mechanisms and taking prompt action can help prevent further complications and mitigate potential issues.

Types of Tax Errors and Their Initial Impact

Tax errors can manifest in various forms, ranging from simple calculation mistakes to more complex reporting issues. Mathematical errors, such as incorrect addition or subtraction, or typos when entering figures like wages, dividends, or bank interest, are frequently encountered. Incorrect filing status, or forgetting to include certain income, also represent common errors.

Claiming incorrect deductions or credits can similarly impact the accuracy of a return. Missing or incorrect Social Security Numbers for the taxpayer, spouse, or dependents are frequent issues that can cause processing delays. These errors can result in either an underpayment of tax, meaning the taxpayer owes more than initially reported, or an overpayment, indicating a larger refund is due or too much tax was paid. While some errors, particularly simple math mistakes, might be automatically corrected by IRS automated systems, others may initially go unnoticed, potentially leading to future inquiries from the agency.

How to Correct a Tax Return

Correcting a tax return generally involves filing an amended return using Form 1040-X, Amended U.S. Individual Income Tax Return. This form is necessary when changes are needed for income, deductions, credits, or filing status that affect the tax liability. Simple math errors or missing schedules might be corrected by the IRS automatically, but for more substantial changes, filing Form 1040-X is required.

Preparatory Information & Form Completion

Gather a copy of your original tax return for the year you are amending, along with any new or corrected income statements (like a W-2c or corrected 1099s) and documentation for adjusted deductions or credits, such as receipts or canceled checks. Form 1040-X requires you to enter the original amounts from your filed return in Column A, the net increase or decrease of each line item in Column B, and the corrected amounts in Column C. A detailed explanation of the changes made should be provided on Part III of Form 1040-X. This explanation helps the IRS understand the reason for the amendment and can expedite processing. You can obtain Form 1040-X and its instructions from the IRS website, IRS.gov/Forms, or through tax software.

Procedural Action for Submission

Once Form 1040-X is accurately completed with all necessary information and supporting documentation is gathered, you can submit the amended return. For tax years 2019 and later, Form 1040-X can be filed electronically through tax software, provided the software supports this option. If filing a paper return, mail the completed Form 1040-X, along with any revised forms or schedules that support your corrections, to the appropriate IRS address. It is important to mail the amended return separately from any current year tax return you might be filing.

Taxpayers can typically expect amended returns to be processed within 8 to 16 weeks, though some cases may take longer, potentially up to 20 weeks. You can check the status of your amended return approximately three weeks after submission using the IRS “Where’s My Amended Return?” online tool on the IRS website. This tool requires your Social Security Number, date of birth, and ZIP code to provide updates on whether your return has been received, adjusted, or completed. Maintaining thorough records of your original return, the amended return, and all supporting documentation is important for future reference.

Potential Consequences of Unresolved Errors

Failing to correct tax errors or if the IRS discovers them first can lead to various penalties and interest charges. One common penalty is the Failure to File Penalty, which applies if a tax return is not filed by the due date. This penalty is generally 5% of the unpaid tax for each month or partial month the return is late, up to a maximum of 25% of the unpaid tax. If both failure to file and failure to pay penalties apply in the same month, the failure to file penalty is reduced by the amount of the failure to pay penalty, resulting in a combined rate of 5% per month.

The Failure to Pay Penalty is charged for unpaid tax after the due date, even if an extension to file was granted. This penalty is typically 0.5% of the unpaid tax for each month or part of a month the tax remains unpaid, up to a maximum of 25% of the unpaid tax. Additionally, interest accrues on underpayments from the original due date of the tax return until the tax is paid in full. As of October 1, 2024, the interest rate for underpayments for individuals is 8% per year, compounded daily, which is the federal short-term rate plus three percentage points.

If the IRS identifies an error, taxpayers may receive various notices, such such as a CP11 (changes to tax return, balance due) or a CP2000 (income reported by a third party does not match the amount on your return). Ignoring these notices can escalate the situation, potentially leading to collection actions. The IRS may initiate an audit, which can be conducted by mail, in an IRS office (office audit), or at the taxpayer’s home or business (field audit). During an audit, the IRS will request documentation to verify information on the return. Ignoring IRS inquiries or notices can lead to more severe consequences, including tax liens on property, levies on bank accounts or wages, or other enforced collection actions to recover the unpaid tax, penalties, and interest.