Industry News - Regulatory Updates

April 20, 2012

Coping with common tax time mistakes

With tax day past, some Americans may need help recovering from errors they made in the rush to file.

For those who have not yet paid or filed, Forbes notes, do not delay any longer than necessary. There is a late-filing penalty equal to about 5 percent of a taxpayer's unpaid balance per month, so waiting makes the bill bigger. Even if it is to request an extension or alternative payment arrangement, contacting the IRS as soon as possible is usually the right decision.

Similarly, late-pay charges accumulate over time. If an individual expects to owe the Internal Revenue Service money once calculations are finalized, it is typically better to make an estimate and pay, rather than wait.

One common error that taxpayers make is to forget to sign their returns after painstakingly ensuring that all the information on them is correct. Unsigned returns are considered invalid by the IRS, the news source notes, so it may be necessary to send another copy. While the IRS does not wish to have multiple copies of the same return, the first cannot be officially accepted, according to Forbes. It might be appropriate to attach a cover letter with the second, completed copy.

For those day traders and other taxpayers who finish and send in their returns and then realize they have made a mistake, such as a computational error, it may be necessary to send an amended return. This is a standard document, available online like most forms. Filing an amended return will likely add to the amount of time required for processing, which may mean that any tax refund is delayed. It could also result in some late charges accumulating, so prompt action is best.