Around 33% of Americans wait until the last minute to file their taxes. You may actually be in luck if you are one of those late filers. Filing late this year enables you to benefit from the mistakes of others.
This year, the primary source of error appears to be simple math errors, including those involving claims for additional Child Tax Credit funds, Recovery Rebate Credits, and Earn Income Tax Credits.
Consider the following: Between January 1 and July 15, 2021, the IRS issued approximately 7.4 million math error notices for stimulus payment errors. Over 67 percent of the 11 million notices sent regarding math errors were due to pandemic-related stimulus issues. We are unsure of the number of letters that will be sent this tax year.
What can you do?
The disadvantage of filing your taxes at the last minute is that you may feel rushed. Allowing a ticking clock to prevent you from double-checking your math is irresponsible.
If checking your math is not your idea of a good time, you are not alone. Online tax software is one tool that can assist. Even if you take pride in doing your taxes on your own, online software is excellent at catching math errors. Consider it as your tax editor, catching any errors that may have slipped your mind.
You could also hire a tax preparer, but they’re in high demand this time of year, and finding someone this late in the game may be difficult. If you are unable or unwilling to hire a tax preparer, we recommend that you:
- Verify and re-verify your math, or
- Utilize online tax preparation software
- How mathematical errors can be induced by stimuli
- I’m curious as to how 67 percent of the IRS’s math error notices sent last year were stimulus-related.
According to Fortune, if you receive an IRS letter this year, it may be because your gross adjusted gross income (AGI) exceeded the following amounts in 2021: $75,000 for single filers, $150,000 for married filers filing jointly, or $112,500 for head of household filers.
Any stimulus funds distributed in 2021 will be based on your most recent tax return (presumably, 2020). If your income increases in 2021, you may be required to repay a portion or all of the stimulus funds deposited in your bank account.
It’s not so much a math issue as it is a case of 2021 being better than 2020. However, the IRS will treat it as a mathematical error. You committed no wrongdoing, but you may still owe money.
The Recovery Rebate Credit is at the heart of all other math error letters. To refresh your memory, the Recovery Rebate Credit was a refundable tax credit available to anyone who did not receive their third stimulus check when they filed their 2021 taxes. If a filer earned too much money to qualify for the stimulus payment, they may have received a math error letter.
Addition and subtraction in the traditional sense
Of course, an IRS letter 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 is possible that something was incorrectly added or subtracted. It occurs.
If the IRS makes an error
You may receive a letter and discover that the IRS made an error. Your math is correct, and they made an error. The IRS encourages taxpayers to contact them at (800) 829-8374 to review their return with a representative.
While that sounds wonderful, it is not as simple as one might believe. Due to understaffing and a backlog of tax returns, your chances of speaking with a live representative on your first attempt are slim. Nonetheless, persevere. Regardless of whether your letter states so (some letters omit this detail), you have 60 days to appeal a math error letter. 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 that 60-day period, you will forfeit all rights to appeal or to have the charges dismissed.
The moral of this story is to address the issue immediately upon receipt of a letter. Contrary to popular myths about the IRS, the agency is actually quite willing to work with you to resolve issues. If you make a mistake, the likelihood is that it is minor. It may take a call or two to resolve the issue, but once it is resolved, you can move on to more important matters.