Cost of Taking the Wrong Tax Deductions
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.
Key Takeaways
- If you take the wrong tax deductions, your tax refund could be delayed.
- Common mistakes include entering incorrect amounts for deductions, making addition and subtraction errors, and forgetting dependent and child care credits.
- An improperly filled out return, or one flagged for possible identity theft or fraud, can require extra processing time by the IRS.
- If the IRS finds errors or needs more information, you might need to amend your tax return using Form 1040-X, to add additional information to file an accurate tax return.
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 childcare 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
- return 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.
TurboTax Tip:
If you file an incorrect return, you may receive a refund check that is different from what you expected. Be aware that you might have to pay back any amount that you should not have received.
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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