This year especially is not a good time to draw the Internal Revenue Service’s attention.
The agency is so understaffed that a mistake on a federal tax return form can delay a refund for months. This happens because an IRS employee must manually process the return, which only adds to those forms waiting to be processed.
To avoid this, be digital and thorough. Do not file a paper return or ask for a paper check.
April Walker, lead manager for tax practice and ethics with the American Institute of CPAs, advises that taxpayers file their returns electronically and request direct deposit of any refund they might be due.
She added that filing electronically catches many of the mathematical errors made in figuring out taxes, and it posts an alert if a taxpayer forgets to sign the return. E-filing also allows taxpayers the ability to track the status of their refund on the IRS site within 24 hours.
“Keep in mind that e-filing software may not detect other problems such as incorrect Social Security, bank routing or bank account numbers,” continued Walker.
“Check all number carefully!”
If a paper return is filed, more errors are likely be made by either the taxpayer or the IRS employee who has to transfer the data from the paper return into the agency’s computer system. As to tracking a paper return, that won’t happen for at least four weeks.
Whether filed electronically or with paper, the IRS’s automated matching system looks for discrepancies between the taxpayer’s employer and financial institutions. A mismatch can cause the IRA to freeze a refund and trigger a notice demanding more information.
As if this were not enough to be concerned about, tax returns can be derailed by a mismatch between the child tax credit or the stimulus payments taxpayers report versus what the IRA says they received from the government.
“Taxpayers who received monthly child tax credit payments in 2021 will have to reconcile those payments with the amount for which they were actually eligible,” said Lei Han, associate professor of accounting at Niagara University.
He also pointed out that the IRS based the payments on income data from a prior year, so some families may have received too much while others will qualify for additional money.
“In addition, eligible people who didn’t receive the third stimulus payment, or who qualified for more than they got, can claim the recovery rebate credit on this year’s tax return,” Han added.
In January the IRS sent out notices to taxpayers who had received payments in 2021.
Letter 6475 summarized how much stimulus money a taxpayer received, while Letter 6419 reported the total advance child tax credit payments.
“If you’re married and received the payments, you likely received two letters about the child tax payments – one for each spouse,” explained Walker.
She added that some people thought the second letter was a duplicate and may have thrown it away.
If taxpayers are missing any of this (or any other paperwork), they should not rely on their memory or bank records; rather, they should create an account on the IRS site and view their IRS records to find the correct figures.
“It you just wing it on that number, it’s probably going to cause a delay,” concluded Walker.