5 Common Mistakes Made on Tax Forms—and How to Fix Them

It’s Tax Day, and many Americans are eager to put the paperwork behind them for another year. But what if you discover a mistake on your return?

There’s a process for correcting a tax return after you file, but not every issue requires what’s known as an amended return. The IRS website has a tool called Should I File an Amended Return? that walks users through various scenarios. 

If a fix is called for, you can file a Form 1040-X online to amend your individual income tax return, and you can check on the status of your amended return with the IRS’ Where’s My Amended Return tool?

Here are some common scenarios:

Math Errors

The Form 1040 records your income and deductions and requires you—or your tax software—to do some basic math with them. If the original numbers are correct but you make a math mistake, you generally don’t need to file an amended return. The IRS will catch and correct the error while processing the return and notify you by mail. 

To be sure, few taxpayers these days do their returns by hand with a calculator, so this isn’t as common a scenario as it might once have been. 

Missing Forms or Schedules

If you forgot to attach a form or schedule to your return, you generally don’t need to file an amended return. The IRS will send you a letter asking for whatever is missing. 

Forgotten Income

If you forgot to include income, whether from wages or investments, that’s usually a reason to file an amended return. Say you lost a 1099 form and forgot about the freelance income on it, only to discover the omission later. In this case, file an amended return and note the missing income.

If the IRS catches the omission before you do, the agency will send you a letter notifying you of the mistake and telling you the additional amount you owe in taxes, including any penalties and interest. If you agree and accept this adjustment, then simply send in the required payment and you don’t need to file an amended return.

However, if you disagree with the assessment—or if you have deductions to claim against that income—then you’ll want to file an amended return, said April Walker, lead manager, tax practice and ethics, at AICPA. 

What if the missing income is very small? For example, what if your brokerage firm sent a new 1099 form for one of your investments after you filed your tax return, notifying you of an additional $25 in dividend income? Your tax bill on that amount would be tiny, and you’re probably OK waiting for the IRS to catch the error and bill you, said Ed Morrow, senior wealth strategist for Huntington Private Bank in Cincinnati. “The larger the dollar amount, the more you want to be proactive, is the general rule,” Morrow said.

Forgotten Credits or Deductions

Some omissions will work in your favor. For example, if you installed solar photovoltaics on your home last year but forgot to claim the tax credit for it, you can file an amended return. Ditto for the child and dependent care credit if you qualify for it but forgot to claim. 

Since the standard deduction was raised as part of the Tax Cuts and Jobs Act of 2017, the most of taxpayers claim the standard deduction rather than itemize their deductions. But if you do itemize and you forgot a deduction, that’s a reason to file an amended return. For example, you may deduct the amount of your total medical expenses that exceeded 7.5% of your adjusted gross income. 

Special State Payments

This scenario is particular to this tax season. Earlier this year, the IRS clarified the federal tax status of special payments made to taxpayers by 21 states in 2022. These payments constituted state-level relief and included California’s middle-class tax refund, child tax refunds in several states, and other pandemic relief payments. 

The agency determined that taxpayers did not need to report these payments on their 2022 tax returns. This means people in the following states didn’t need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska is included as well, but only for special supplemental Energy Relief Payment received.

Last week, the IRS said that taxpayers who filed early in the season and reported the above state payments as income should consider filing an amended return.

The situation is a bit more complicated in Georgia, Massachusetts, South Carolina and Virginia. Taxpayers in these states didn’t need to include special state 2022 tax refunds as income for federal tax purposes if they meet certain requirements, including if the payment is a refund of state taxes paid and the recipient either claimed the standard deduction for tax year 2022 or itemized their tax year 2022 deductions but did not receive a tax benefit.

Write to Elizabeth O’Brien at elizabeth.obrien@barrons.com