What happens if I make a mistake on my taxes?
This film is part of the series "General Tax Return Questions"
What happens if I make a mistake on my taxes?
You've done it. You've finished your tax return, it's filed, you send it off in the mail and, invariably, the minute you dropped it in the mailbox, you realize you forgot something. You've made a mistake. "What do I do now?" You can't crawl into the mailbox and retrieve it. However, the tax law is okay. It understands that people make mistakes on their taxes sometimes. There's something called the statute of limitations that you first have to bear in mind. If you file your tax return on April 15th or before, you have three years from that date with which to correct your tax return. Actually, the IRS also has three years from that date with which to question you on your tax return, so it's a two-edged sword. If you made a mistake on April 15th, 2007, when you filed your 2006 tax return, you actually have until April 15th of 2010 to file an amended return, correcting the mistake. It's a simple form. Again, follow the instructions on the form. It basically says, "One column has got what I did file, the last column is what I should have filed, and the middle is my mistake." If you owe the government more money, pay it; if they owe you money they'll send you a tax refund.
What should I do if I haven't filed taxes in a few years?
Here you are, you're hearing about all your friends filing their tax returns and you're getting a little worried because you haven't filed one for a few years. First question in your mind should be "was I required to file a tax return?" "Did I have enough income to require me to file a return?" "Yeah, I did." "No, I didn't file the return." "Am I in trouble?" You could be. "What do I do?" First thing you want to do is gather the data together for those years and file the returns. Bear in mind if you file the tax return late, and you owe money to the government, there's going to be some penalties that you're going to pay. You know, bear in mind also that if the government owed you some money, they've just been sitting on it, waiting for you to file the tax return so they could send you the refund. Also understand that if the government owes you some money, and it's more than three years past the normal due date, you're not going to see the money from the government. If you owe them some money, and it's beyond the three years, they're still going to want their money. They're a little kind of one way about things like that. But, don't panic. Usually the biggest problem people run into when they havn't filed a return is they miss one year, and then when the second year comes up, they're panic striken and they just figure "I'm off the radar. The government won't find me." Don't believe it. They'll find you sooner or later. The best thing to do is seek some professional help, get these old tax returns filed, and get back on track.
What is an "extension" and are there any consequences for taking one?
Here it is, it's April 14th. You've got all your stuff together and you haven't even started filling out the forms and you go, my god, I've got one more day to get this thing done and mailed. What do I do now? Well, don't panic. You can file an extension. But I caution you that an extension is an extension of time to FILE the tax return. If you owe the government money with the tax return, it's not an extension of time to pay the taxes.On April 15th, if you know you owe the government some money, you want to send that money along with the extension. Otherwise you're going to be paying a penalty of about one percent per month, penalties and interest, on the amount of money that you owe the government up until the time you file the tax return. If you file an extension and you only need two weeks, and you owe them money, that penalty and interest is only going to be for two weeks. If you wait all the way until October 15th to file a return, it's going to be six months worth of penalties and interest.
What is the "Earned Income Credit" (EIC)?
An earned income credit (EIC) is something that the Congress and government has put together that says if your income is below what they determine to be poverty level, then you're entitled to get something called an Earned Income Credit (EIC). You had wages, you had a family, you didn't make enough money and if you look through the return and follow all the instructions, you find out that the government is going to send you some money called an Earned Income Credit (EIC). It's a refundable credit that you get mailed to you, regardless of whether you paid any money in out of your paycheck or not.
What is the "Alternative Minimum Tax"?
You must understand that the Alternative Minimum Tax when it was originally put into play was designed to go after the high income tax payers that had the ability to shelter their income through various means. Congress felt, with the IRS' prodding, that we needed to collect a minimum tax; an alternative tax from these high income tax payers who were able to avoid taxation through various means available to them. Unfortunately, over the years the Alternative Minimum Tax hasn't been indexed or dealt with. So, as people's income kept growing and growing the Alternative Minimum Tax was still
at this level field, and you came to a point where the alternative tax was at a particular level, and income was growing to reach that level. Now, they're intersecting, and where it was affecting very few people in the beginning, it's starting to affect more and more people each year.
Do I have to pay the Alternative Minimum Tax?
One of the things you are going to find when you're filling out the tax return is a note that says Alternative Minimum Tax. It's a form that needs to be filled out. To try to tell you what is the Alternative Minimum Tax or when do you become subject to the Alternative Minimum Tax is way too complex for this short time span that we have. If you think you might be subject to the Alternative Minimum Tax, you definitely need to seek the help of a professional. If you don't do it and you think you may be subject to it, and the tax program that you're using doesn't tell you to be concerned with this tax, you'll probably get a letter from the IRS saying you were subject to the Alternative Minimum Tax and you owe us some more money. It's one of those things that you can't really avoid. If you're subject to Alternative Minimum Tax, you're subject to it. It's one of those things that you really don't know whether you're subject to until you finish the tax return. It's hard to plan for it, but bear in mind that it's out there and it could bite you.
What are the most common mistakes people make in filing taxes?
well,one of the most common mistakes when filling taxes is, you know the question comes up as your thinking about it you think you got everything put together your ready to process the tax return and send it off to the government ,and your thinking to yourself "heh,did i make a mistake did i miss something?" Are there a list of common mistakes? Yea the IRS puts out a list of common mistakes usually their because someone added something wrong or put something on the wrong line. I think the common mistakes that you'd look as your preparing your return is just missing things. Take your time, look through it, if your unsure whats deductible and whats not deductible again seek the help of a professional, read the instructions, don't be in a hurry, take your time and again be prepared, plan for this thing all year long. Don't wait till the last minute.
What are some tax filing "red flags" that can trigger an audit?
Well, you've sent your tax return off and every thing is right to the best of your knowledge. Then you're talking with some friends and they say, "well what about this?" Well that's a red flag! Well what do we mean by a red flag? You know is it a little red flag, or is it a giant red flag? What could trigger an audit? Well, only the IRS and very fiew people know specifically what could trigure an audit of your tax return. How ever there are certain things that will put up flags to the government. One of the things you could think about is, I'm looking at my total income, and then I look at all my deductions and my deductions are bigger than my income. You know, that might put up a little red flag. That's like saying, how could you spend all this money if you didn't have enough money coming in. Some of the deductions that you put on your return might be considered a red flag. An office in the home is one of those little flags. Contributions to a charity while you can deduct 50% of your income. Statistically most people are down to maybe the 10 or 12 percent range. So if your contributions are very high, it might put up a flag. It's not to say that it's wrong, or that you're not in-titled to the deductions, but it's a greater likely hood that maybe they'll audit your tax return. If your income is real high, up in the $100,000, $200,000 range the IRS figures that the higher the income the more likely you are to have problems on your tax return, that they can fair it out. Also bare in mind that if they found a mistake they're gonna be able to generate more tax from that mistake, than if they're looking at some low income tax return. What's a red flag? Anything can be a red flag. Just be aware of it and know that you're putting some thing on your tax return, that you have the details and the documents that substansiate that deduction.
How soon can I expect my tax refund?
There's a couple of things going on in the dynamics of the tax return world today that affect how soon you receive your tax refund. If you electronically filed your tax return, and you filled in the stuff on page two about your bank account information, and you wanted to have the refund directly deposited into your account, and you electronically filed the return, tyou will receive the tax refund between eight to ten days later. Quick! If you don't want the government to know where your savings account and checking account is, so you electronically filed the return but let them mail you the check for the tax refund, that check may come in about three weeks. If you don't want to electronically file because you have a phobia against anybody knowing about your computer and you want to fill out the form, sign it, drop it in the mailbox, snailmail it to the government, you're probably looking at six to eight weeks to get your tax refund back.Source: www.videojug.com