A Checklist for the IRS?

Tip of the Month

January 2002

A Checklist for the IRS?

What a concept: Taxpayers having a checklist for the IRS. Well, we all know the IRS rarely makes an error. After all, they process over one hundred million tax returns every year. But when they do make a mistake, it's usually one of the following:

â¢ Wrong Social Security Number
Usually a data entry error, a social security number on your return may be entered incorrectly. This may change filing status, eligibility for certain deductions, etc. You get the picture.

â¢ Wrong Income
This most often occurs if a dependent or someone else opens a bank account under your name. Their income may be mistakenly recorded as yours. Trading places with granny?

â¢ Lost Return
Yes, it does happen. If the IRS (or the US Postal Service) loses your return and/or payment, it is your responsibility to provide another copy. This has a simple remedy: Keep a copy of your return. Electronic filing reduces this possibility, but keep a copy of that one too, just in case.

â¢ Misapplied Payments
Your payments may be posted to the wrong tax type or the wrong year. Sometimes, the IRS does not properly apply payments you've made. Also, if you have an overpayment from the previous year, make sure that it is properly assigned. Keep you receipts.

â¢ Incorrect 1099
Check your 1099 carefully. Frequently businesses report an incorrect amount of income. Numbers are tiny things that sometimes run around at night when nobody is looking.

â¢ Partially Corrected Error
If you caught an error the IRS made from a previous return, you may not have been properly credited. Such as, the interest and penalties may not have been removed. You sleep, you weep.

â¢ Exempt Income
Sometimes income, from an IRA, Keogh, a pension account or from municipal bond interest which is not taxable, is mistakenly reported as taxable income.

â¢ Misunderstood Date
If a due date falls on a legal holiday or a weekend and you filed on the first business day following, the computer may not recognize this. Remember, some computers are called dumb terminals. Also, sometimes the computer forgets that you filed and extension. Oops.

â¢ Double-Counted Income
Sometimes the errors are really goofy. Like when the IRS moves income from an incorrect line to the correct line but forgets to remove it from the original line. White-Out anybody?

â¢ Data Processing Error
If you get a notice from the IRS saying that you have made a math error, check it. Sometimes a math error is declared when there is none. A mistake of no mistake. Now, that's Zen.

What's the moral of this story? Live and let live. We all mistakes from time to time, even the IRS.

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.