Make a Mistake on Your Tax Return? Here's What You Need to Know

It's been said that it's human to err, but to really foul things up takes a computer. While this may be true for many computer tasks, when it comes to your tax return, most errors can be traced back to the person filling out the return.

There are a variety of potential errors that can be made on an individual's tax return. Transpose one digit in a Social Security number and your dependent disappears, along with any related tax credits. Move a decimal point, and you've instantly become a six-figure earner with the tax balance to prove it.

So what should you do if an error has been made on your tax return? Initially, it depends on if the error was self-identified or caught by the IRS.

The IRS return processing centers routinely check for math errors. If line entries do not add up, or if certain required items are not included, the return may be held up. If the tax return cannot be processed, a notice will go out to the taxpayer requesting the missing information.

If the error can be corrected in-house, the IRS will automatically make the adjustment and send out a notice advising of the increase or decrease in the tax or refund.

If you identify that an error was made, depending on the mistake, a simple telephone call to the IRS at 1-800-829-1040 may be able to reconcile the problem.

As in the example with the wrong digit used in a Social Security number, this problem is easily corrected over the phone. Advise the IRS representative of the correct number; they will verify the number with records provided by Social Security and make the adjustment for you.

Other straightforward mistakes can also be rectified without much hassle. If you forgot to sign your return, no worries - the IRS will send out a signature card to sign and return. If you forgot a required schedule, then you will notified and given time to provide it.

What about if you neglected to include an income source on your tax return? This problem can be potentially more severe, since it may mean that you will owe money back, plus applicable penalties and interest.

The IRS has three years to review all tax returns for unreported or underreported income. This document matching system reviews all payee documents sent in, such as forms W-2 and 1099, with what was reported on your tax return.

If a discrepancy is found, the IRS will send out a CP2000 notice. This is essentially an audit done via the mail. The notice proposes a tax increase, and identifies the source(s) of income that was left off of the return. The notice asks that you either sign as agreed and elect one of the repayment options, or, if you disagree, provide a written reply with substantiation.

You shouldn't wait however if you become aware that you left off a source of income. Immediately amend your tax return using Form 1040-X.

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