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What Happens if You File Taxes Wrong? 4 Scenarios You Might Face

what happens if you file taxes wrong

Tax season comes every year. But every year, you can still get caught off guard with tax problems that require fixing and repairs. 

Ideally, you allow yourself enough prep time before the April 15 deadline. Filing tax returns is not something you should cram at the last minute. If you do, you could end up making inaccurate financial declarations. Perhaps you might under-declare your income or over-declare your rightful refund.

Either way, the Internal Revenue Service (IRS) will know. And when that happens, you might face scenarios you’d rather not get entangled with.

So, what can you expect if you file taxes wrong? Here are the possibilities.

4 Scenarios That Might Happen if You’ve Filed Your Taxes Wrong

1. The IRS notices the mistake—and you amend your file

You may notice an error before the IRS, and your knee-jerk response might be to file a new tax return. Resist the urge to do that. Instead, check with the IRS or your tax professional to know for sure.

The IRS has systems and technologies to spot minor errors in tax declarations. Suppose you’ve misspelled names resulting in data discrepancy. In such a case, you will receive correspondence from an IRS representative notifying you about the mistake. You then have ample time to amend the error.

You can resubmit an amended tax return using Form 1040-X. Visit the IRS website or have your tax professional prepare properly on your behalf.

The IRS cross-references data from multiple sources. That’s how they spot erroneous details in tax returns. However, some errors can go unnoticed. So, upon initial filing, double or triple-check your tax return. Save yourself the trouble of extending tax season just because you made a typographical error or other avoidable mistakes.

2. The IRS may not notice at first but catch it during an audit

It’s also possible for the IRS not to notice the error and process your tax return. While all will be well and good in the meantime, this little mistake can bite back when the IRS performs an audit on your account.

After some time, you may receive an IRS notice informing you of an audit on your account. Most likely, the IRS will find whatever they are looking for, and you can end up with a larger tax bill bloated with interest.

3. You may be beset with additional penalties

Errors or omissions may result in IRS penalties. And usually, they are linked to tax underpayment. If the IRS proves that you understated your income and paid insufficient taxes, expect the following penalties.

  • Late payment penalties – 0.5% of overdue taxes for every lapsed month after the due date
  • Negligence penalties – 10% of total taxes owed for understatement exceeding $5,000
  • Fraud penalties – Up to 75% of owed taxes due to malicious and conscious understatement

4. You may be charged with tax evasion

The worst-case scenario that may arise from tax filing errors is getting charged with tax evasion. This offense means the IRS has proven you deliberately attempted to deceive the U.S. government. A tax evasion charge may be filed against you alongside civil fraud.

Tax evasion alone will require you to pay a fine of $250,000. You might also find yourself in prison for five years. To avoid these unfortunate possibilities, take tax season seriously enough to get your returns right the first time. More importantly, do not try to one-up the IRS because that’s not something you can get away with.

Can You Be Arrested Due to Filing Your Taxes Wrong?

Tax negligence, per se, is not a criminal offense. So if you made a mistake on your tax return because of haphazard filing, the worst that can happen is you do not get the refund you deserve, or you’ll have to pay penalties for excess taxes you failed to account for. However, if the IRS declares fraudulent intent, expect a more severe outcome and harsher penalties. 

Keep Calm and Stay Tax-Compliant

Filing tax returns can get a little too overwhelming, not to mention complicated. That’s most true if you have a lot to account for. However, no matter how seemingly challenging tax season becomes, it’s in your best interest to keep calm. Tax compliance requires accuracy in filing returns, which will only happen through level-headedness.

If you mistakenly filed taxes wrong, do not panic. Reach out to us at Peace of Mind Tax Help, so we can work together to settle the issue. Rest assured, our team of expert tax negotiators and mediators can help you get peace of mind.

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