Despite the fact that a growing number of U.S. taxpayers are submitting their tax returns electronically – a method that, in theory, should promote accuracy by automatically tallying totals – The Associated Press recently revealed that mathematical errors may be on the rise. The A.P. reports that 2.7 million miscalculations were made in total during the 2011 tax year. Note that is more than Double the number of errors from the year before.
There is no need to panic but you should be on the watch for tax penalties that are applied when these sorts of errors happen. What happens typically is that the IRS will find the error by use of its technology. which automatically screens tax returns to match income, check math, and check the Flags for Audits. Whether or not you need to take action depends on the scope of the error – if it really is a math error or if the IRS believes the discrepancy is due to intentionally not reporting certain income or another intentional act. If the IRS catches the mistake, it may just send you a notice notifying you that it is changing your return to reflect what it believes to be correct. In the case of the later, it may pull your return for audit or further investigation.
In any event, should you discover an error, you should speak with a tax attorney to discuss the course of action that is right for you. If you receive any notices from the IRS, you should always double check them yourself and your tax lawyer to make sure you agree with them. There may also be penalties assessed because of the error. These penalties may be negotiable. Therefore, if you have been contacted by the IRS or Franchise Tax Board because of a issue with your tax return, or want to get an early start on next year’s tax planning, please contact us to review your situation.