TaxMama® is a big proponent of the “slow-down” philosophy. Use the extension. Take the time to review the tax return and the information in it – and take the time to think back on the year to see what’s missing from that tax return.
Here in our office, we ask all our clients (as early in the year as possible) if they opened any new businesses, or established any LLC’s or got tax ID#s that we don’t know about. Did they have household help, or pay anyone as a freelancer – so we can issue W-2s and 1099s in time. Did they get any notices from the IRS or state that changed their prior year refunds (up or down)? Or that changed the estimated tax carried over from the previous year?
By filing a tax return once, with all the required income and deduction information, you dramatically reduce your chances of audit. Anytime you file an amended return to correct something (anything), a real, live IRS agent is going to look over your tax return. And they just might stumble across some glaring error you didn’t notice because you were zipping along to file quickly – and again, didn’t check to see if there were any other things to change when you filed your 1040X (or business correction).
The IRS just issued a Tax Tip about this (as I was writing this message to you). There’s some excellent advice. Especially about when NOT to amend – because the IRS will take care of it. Yesterday, Kelly Phillips Erb wrote about 15 things you need to know when making a mistake on your tax return.
Some of the errors that have been asked about this tax season include:
- Missing 1099s
- The wrong employer ID # on an S Corp election.
- Not making the S Corp election – for current or several earlier years.
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- E-filed right on the deadline and the tax return was rejected – uh oh – it’s late?!
- Missing pass-through income from K-1s.
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- Filing a tax return to report income that should have been split among family members – without making the necessary disclosures and reductions.
- Forgetting to include various types of income, like unemployment, Social Security, or other things you don’t really think about at tax time.
- Wanting to move 2018 expenses into 2019, because they left them off the return.
- Leaving estimated numbers in the tax return when you thought you replaced them with the actual amounts – and doubled the income or deduction.
- Entering the wrong information on the W-2s – sometimes off significantly.
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- Using the wrong distribution code on an IRA or retirement account distribution (and getting hit with thousands of dollars of penalties – needlessly).
These are just the usual suspects.
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There are all kinds of other mistakes resulting from excessive speed.
My message to those of you who are on extension, please, slow down. Read everything in your tax return. Think through about what else might be missing, duplicated or estimated.
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Run the review tool in your software. Make any last minute retirement account contributions (if available). Only then, file your tax return. But, please do all this well before the filing deadline.
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At https://iTaxMama.com/AskQuestion