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Cost of Taking the Wrong Tax Deductions

Updated for Tax Year 2022 • December 1, 2022 09:42 AM


OVERVIEW

Taking the wrong tax deductions can cost you time and money. If you're depending on a tax refund, a tax return that is improperly filed can keep you waiting for a long time. You may also get back less than you expected.


 

wrong tax deductions

Common mistakes

If the Internal Revenue Service suspects errors or requires proof of deductions, you may be asked to provide back-up documents to prove your numbers and amend the return. "If the IRS requires further information," advises Bill Symons, president of Computer Accounting Services in Oswego, N.Y., "You'll receive an official request by mail. Normally the situation is easily rectified, but it can delay refunds by up to 10 to 11 months."

A small mistake, such as entering a deduction on the wrong line, can be the difference between paying the IRS and getting a refund. Some common mistakes that taxpayers make include:

  • The wrong amount for the deduction
  • Addition and subtraction errors
  • Forgetting dependent and child care credits

Remember, when you use TurboTax to prepare your taxes, we handle all of the calculations and enter them into the proper forms for you. We also double-check your returns for errors before you file.

Delayed tax return

When an improper deduction is made on a tax return, it can raise a number of red flags that require IRS to review it. This takes time. Two reasons why your return may require extra processing time if the wrong deduction is made are:

  • An improperly filled out return
  • The return is flagged as having a possible identity theft or fraud

Calling the IRS and requesting information on your refund won't help either, unless your return was filed over 21 days ago electronically or mailed 4 weeks ago. The IRS will not give you an expected date of receipt until it is approved. Ordering a tax transcript will not provide any information on your refund, because the codes used on the transcript can be different for each individual situation and may have nothing to do with the amount of the refund and when you can expect to receive it.

Amending a tax return

If the IRS finds errors or needs more information to complete its deliberation, you will receive a letter in the mail. This means an amended return might be necessary. The form normally required is 1040-X. Make sure all information is accurate and contains what the IRS specifically requested. Ensure Social Security numbers are correct and deductions are entered properly, including any tax credits.

Dealing with incorrect refunds

At times, if a deduction is improperly entered, the amount you expect as a refund isn’t what the IRS sends. You can expect the refund check and the explanation letter to arrive at different times. If you have questions, you can call the IRS while you wait for the explanation letter to arrive. If the check is smaller than you expected, it’s generally OK to cash it. If the check is more than you anticipated, you can cash it but you should be prepared to pay back any amount that you should not have received.

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