Approximately 33% of Americans file their taxes at the last minute. If you are one of those late filers, you may be in luck. Filing late this year allows you to learn from the mistakes of others.
This year’s biggest issue appears to be simple math errors, including issues with claims for additional Child Tax Credit funds, the Recovery Rebate Credit, and the Earn Income Tax Credit.
Here’s an example: Between January 1 and July 15, 2021, the IRS issued approximately 7.4 million math error notices for stimulus payments alone. More than 67 percent of the 11 million math error notices sent were due to pandemic-related stimulus issues. We don’t know how many letters will be sent this tax season.
What you could do
When you wait until the last minute to file your taxes, you may feel rushed. Don’t let a ticking clock keep you from double-checking your calculations.
If double-checking your math isn’t your idea of a good time, you’re not alone. Online tax software is one tool that can be useful. Even if you take pride in doing your own taxes, online software is excellent at detecting math errors. Consider it your tax editor, catching any errors that may have slipped your mind.
You could also hire a tax preparer, but they’re busy this time of year, and it might be difficult to find someone this late in the game. If you do not want to hire a tax preparer or are unable to find one, we recommend that you:
- Check and double-check your calculations, or
- Make use of online tax software.
- How can math errors be caused by stimuli?
- Is it any surprise that 67 percent of the IRS’s math error notices last year were stimulus-related?
According to Fortune, if you receive an IRS letter this year, it could be because your gross adjusted income (AGI) in 2021 exceeded the following amounts: If you file as a single person, you can deduct $75,000, $150,000 if you file jointly, or $112,500 if you file as head of household.
Any stimulus funds distributed in 2021 were based on the most recent tax return you filed (presumably, 2020). If your income rises in 2021, you may be required to return some or all of the stimulus funds that were deposited in your bank account.
It’s not so much a math problem as it is a question of whether 2021 is better than 2020. Nonetheless, the IRS will regard it as a clerical error. Even if you did nothing wrong, you may still owe money.
The Recovery Rebate Credit is at the heart of other math error letters. To refresh your memory, the Recovery Rebate Credit was a refundable tax credit that anyone who did not receive their third stimulus check could apply for when filing their 2021 taxes. If a filer earned too much to qualify for the stimulus payment, they may have received a math error letter.
Traditional addition and subtraction
Of course, a letter from the IRS informing you of a math error may have nothing to do with stimulus payments, the Child Tax Credit, or any other pandemic-related issue. It’s possible that something was incorrectly added or subtracted. It does happen.
If the IRS makes a mistake,
You may receive a letter and discover that the IRS made a mistake. Your math is correct, and they made a mistake. The IRS encourages people to call them at (800) 829-8374 to review their return with a representative.
While that sounds great, it is not as simple as one might think. Due to understaffing and a backlog of tax returns, your chances of speaking with a live representative on your first attempt are slim. However, keep trying. You have 60 days to appeal a math error letter, whether your letter says so or not (some letters omitted this information). It is up to you to provide additional information to demonstrate to the IRS that you are correct and that the initial finding should be reversed. If you do not contact them within 60 days, you will lose all rights to appeal or have the charges dropped.
The moral of this story is to address the issue as soon as you receive a letter. Despite what we hear about the IRS, the agency is actually quite willing to collaborate with you to make things right. If you made a mistake, chances are it was minor. It may take a phone call or two to resolve the issue, but once you’ve done so, you can move on to more important matters.