By Tina Orem – Market Watch
\nMailboxes are flooded with tax forms every year around this time, and many of them can be confusing, feel unnecessary or involve seemingly trivial amounts of money. But before succumbing to the urge to shove those pieces of paper into a drawer and pretend they don\u2019t exist, beware \u2014 the IRS probably already knows what\u2019s in that drawer. Two tax pros explain.<\/p>\n
Double trouble<\/p>\n
Many tax forms you receive at tax time don\u2019t go only to you; in many cases, the senders give copies to the IRS as well. Those forms, called information returns, typically are records of certain payments you received or made during the tax year that you usually need to report on your tax return. Some of the most common information returns are\u00a0W-2s, which report wages earned from a job, and\u00a01099s, which report money received for things such as freelance work, dividends or interest.<\/p>\n
But other money moves you make could put information returns in the IRS\u2019 mailbox, too, says Ignatius Jackson, a certified public accountant in Phoenix. Distributions from retirement accounts could generate an information return, for example, as could unemployment compensation, prizes or awards, college fund withdrawals, stock transactions or canceled debt. Even paying your mortgage can generate one.<\/p>\n
Meeting your match<\/p>\n
Why the copies for all of these? The IRS uses information returns to double-check you. \u201cWhat the IRS will do once you file your tax return, whether you\u2019re e-filing or filing on paper, they go ahead and match up what\u2019s in their system of records and compare that to what you have on your return,\u201d Jackson says. \u201cIf there\u2019s a difference between the two, they\u2019ll usually send you a letter saying, \u2018Hey, we have a different amount. We show that you had more income than what you reported. You owe us some additional money. If you disagree, respond and let us know why. What has been reported to us is incorrect.\u2019\u201d<\/p>\n
Donna Mullin, a certified public accountant and director at Boyer & Ritter in Camp Hill, Pennsylvania, says she\u2019s seen clients get notices for very small amounts. But two things can help avoid the headache, she says.<\/p>\n
Check your information returns for accuracy<\/p>\n
If your employer sends you a W-2 that says you earned more than you actually did, don\u2019t ignore it or report a different number on your tax return. \u201cThe best thing for you to do if you get a wrong one is to contact the issuer \u2014 the person who gave it to you \u2014 and ask for correction,\u201d Mullin says.
\n\u201cIt\u2019s awfully hard to prove you didn\u2019t have that income if somebody else says you did.\u201d
\nIf after you file your taxes an unexpected information return lands in your mailbox or you find one you shoved in a drawer weeks ago, you can get a do-over by filing\u00a0IRS Form 1040X\u00a0to amend your tax return, Jackson adds. And avoid foot-dragging. \u201cThe best thing would be to file an amendment before you receive the letter,\u201d he says.<\/p>\n
Don\u2019t automatically assume you screwed up<\/p>\n
If the IRS sends a bill for more taxes and claims you owe because its records don\u2019t match the return you filed, take a minute to review everything carefully before busting out the checkbook. \u201cA lot of people just pay it when in fact they don\u2019t necessarily owe the money,\u201d Mullin says. \u201cI would not assume that it is right and you were wrong. I would assume that you could be right. You have to read the details to see what they think you didn\u2019t report and look at your return and see if it\u2019s actually on there.\u201d<\/p>\n
Often the issue is that something on your tax return is labeled slightly differently than what\u2019s on the information return, she says. \u201cIn more cases than not, certainly if the return\u2019s professionally prepared, the IRS is wrong, but the matching\u2019s just not working perfectly,\u201d Mullin says. \u201cNine times out of 10 they\u2019re wrong; we\u2019re right. We just have to just help them to locate the match.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
By Tina Orem – Market Watch Mailboxes are flooded with tax forms every year around this time, and many of them can be confusing, feel unnecessary or involve seemingly trivial amounts of money. But before succumbing to the urge to shove those pieces of paper into a drawer and pretend they don\u2019t exist, beware \u2014 […]<\/p>\n","protected":false},"author":4,"featured_media":7401,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[23,24],"tags":[],"class_list":["post-7400","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-irs","category-us-tax-return-1040-1040nr"],"acf":[],"_links":{"self":[{"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/posts\/7400","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/comments?post=7400"}],"version-history":[{"count":0,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/posts\/7400\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/media\/7401"}],"wp:attachment":[{"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/media?parent=7400"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/categories?post=7400"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ustaxconsultants.es\/es\/wp-json\/wp\/v2\/tags?post=7400"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}