 Internal Revenue Service IRS tax news. Easy steps to avoid tax return errors that can delay processing or adjust refunds. In other words, don't mess up your taxes or your tax return may go to the end of the unprocessed return pile, a pile that may well be infinitely long at this point. But first, an attempt at a joke, I apologize in advance. With regards to an audit, my tax advisor told me, don't get your hopes up. And I was like, but my hopes like going up. I think rising is the natural state of hope. Advisor responding, yeah, but it's not good when you can't reach your hopes way up there without a ladder. Hope should be more accessible. Plus, when you start climbing that ladder, in order to reach those hopes, the government and the IRS have a nasty tendency to come kick that ladder right out from under you, watching you fall with a wicked smile plastered on their face. Really? Hey, wait a second. Since when did the IRS start hiring my relatives? IR 2022-62, March 22nd, 2022, Washington, the Internal Revenue Service today reminded taxpayers how to avoid common errors on their tax returns. Of this filing season, the IRS has seen signs of a number of common errors, including some taxpayers claiming incorrect amounts of the recovery rebate credit and child tax credit. I love the way they word it here. Kinda sounds like they're surprised over there at the IRS. Oh, what do you know? There's having a problem with the recovery rebate credit and child tax credit, but they knew well in advance that there was gonna be a problem. They may not have prepared for it, but they knew well in advance for one because the recovery rebate credit had a problem last year, which is causing a backup of the returns all the way since then. So they were anticipating it happening again. And plus, these are just new things. Obviously, we haven't seen these kind of credits before. This kind of prepayment type of thing is a new thing. They're changes to the tax law. So it also, the way they kinda word it here, kinda seems like they're blaming the taxpayer for the problems like, ah, the taxpayers just aren't figuring out the tax code here, but the reality of the situation is also that the tax code is changing a lot in some complex ways and it's changing on a lot on the lower income taxpayers, which usually should have a very easy tax return you would think to be filling out if you don't owe much taxes. But these two credits, we knew this was gonna be a problem here. The recovery rebate credits is linked to the stimulus payments. Now, the way they worked it out, I think basically they might've basically sent out the payments and then tried to backfill how they're gonna kinda figure this whole thing out, but they basically gave it out as a prepayment. So the stimulus payments were a prepayment of the recovery rebate credits. But if everything went well, then the prepayment, you wouldn't have to do anything with the recovery rebate credit. It's really there as a catch or a double check to encase the payments went wrong. But it's a little bit confusing because of that because most people then obviously don't really need to deal with the recovery rebate credit if they got the proper amount of the stimulus payment and the recovery rebate credit doesn't sound anything like the stimulus checks or whatever they're calling the economic impact payments. They don't sound like the same thing. So it's hard for people to kinda say, oh, that's a link between these two things. Plus, this whole concept of a prepayment of a credit is still somewhat of a new concept. And it's kind of a weird thing. And obviously there's gonna be errors if you make a prepayment based on information that you don't have, right? You're making an estimate even if you make it an easy thing. So all those things were causing a problem. And of course, we have three payments that have gone out at this point. And we're only looking at the third one which is connected to the tax return for 2021. Whereas the prior, and so that's gonna be filed by April 15th or April 18th of 2022, the prior two were connected to the prior year tax return 2020. So now you've got people that are gonna be confused of course between the three stimulus checks that are now split between the two tax years. So there's a lot of kind of confusion with regards to that. The child tax credit is the other big one that they made a significant change on and they increased the amount of the credit. And then they did this prepayment thing again and given the prepayment adds a whole level of complexity because again, they can get the estimates wrong. They can get the prepayments wrong. They tried to send out the checks monthly. The checks could go to the wrong place. You can imagine a million different problems with it. You also have the fact that you have custody issues where one dependent might be on different returns. So you could miscalculate the prepayments. So obviously there's gonna be issues with that as well and it's just new. So all of these things make it more complicated to file a tax return, especially for kind of lower to mid-income families oftentimes. So, but the fact is that you wanna get it correct if you're trying to get the refund as fast as possible because if you get these things wrong, the IRS has backed up on returns. They have to actually process because although they saw these things coming, they didn't, there's not much they could do because they were forced to put this stuff into place and they were restricted with the COVID restrictions. The federal restrictions of course hit the IRS first because they have most control over the Fed first before they can try to control the rest of the country with these laws or something. So they are subject to those. So the result is that if there's any problems that need human beings to figure it out, the machine can't just process it, then those returns go to the back of the pile, you can imagine, which could get quite large at this point in time as we've been getting backed up for a couple years now. So if there's a problem with the return, then you might end up in a delay situation and we'll see how long those delays take, but they could be significant, you would think. So you're trying to get the returns done right if you're looking for the refund. If you're not getting a refund, by the way, if you owe money, then you might not care. You might just file a paper return and send it in as long as you don't get hit with the penalties and the interest. They can put it on the end of the pile, the infinite pile and if they never get to it, as long as they're not charging you, penalties and interest, maybe that's not a big deal. But in any case, to avoid errors on these common credits, there are some key steps people should remember. Taxpayers should refer to letter 6419 for advanced child tax credit payments and letter 6475 for the third economic impact payment amounts they've received or their online account to prepare a correct tax return. So you should, this was their big effort to try to fix this problem that they knew was coming. They sent out these letters that are supposed to tell you the information you need to process the return and that's good, but it's clearly not gonna solve the problem and they have an online account which now it's a little bit more easy to get into the online account. That's another one that they should have up and running you would think because online banking can do it, you would think that and they have personal information and so on, so you would think the IRS could do it, but they were doing that facial recognition for a while, which was really hard to get access to and it seems just why would you need facial recognition government, like why? So they took that out now but it's still a little, so you should be able to get an account and you can look up this information on your account as well, so that's the way to go. So to prepare a correct return, claiming incorrect tax credit amounts can take only delay of the IRS processing but can only lead to adjusted refund amounts. Here are other easy ways to avoid common mistakes being seen so far on this season. So file electronically, taxpayers can use their computer, smartphones or tablets to file their taxes electronically. I can't believe anyone would file it on their phone but you can, maybe it's just me. Wouldn't your eyes like filling out the thing on a big screen is hard enough, but maybe if that's what you got, you could do it, you could do it, you could do it. I think I could do it if I had to, but in any case, whether through the IRS free file or other e-file service providers to help reduce mistakes. So they're saying use tax software because the tax software has the double check kind of processes to help avoid errors. It's not gonna avoid all errors but there's a whole lot of errors that you can put on a paper tax return that will be possibly caught by software if using software. So tax software guides people through each section of their tax return using a question and answer format. Enter information carefully. This includes any information needed to calculate credits and deductions. Using tax software should help prevent math errors but taxpayers should always review their tax return for accuracy. So tax software helps but it doesn't eliminate all errors. It eliminates a lot of the math errors but there are still a wide range of errors that are out there that we could make. So use the correct filing status. Tax software including IRS free file also helps prevent mistakes when selecting a tax return filing status. We're talking married, single, head of household and so on. If taxpayers are unsure about their filing status, the interactive tax assistance on irs.gov can help them choose the correct status especially if more than one filing status applies. There's a link to that here. Answer the virtual currency question. Here's the one, virtual currency. Did you use virtual, did you? You're going on a list. You're going on our list. The 2021 Form 1040 and Form 1040 SR asks whether at any time during 2021 a person received, sold, exchanged or otherwise disposed of any financial interest in any virtual currency. If you did your bank accounts, okay. Taxpayers should not leave this field blank but should check either yes or no. Report all taxable income. Underreporting income may lead to penalties and interest. Organized tax returns help avoid errors that lead to processing delays and may also help find overlooked deductions or credits. So obviously they want all the income reported. So taxpayers should have all their income documents on hand before starting their tax return. So some of it might have been a little bit more difficult for the people issuing all these, the W-2s and the miscellaneous and so on because of the credits and the things that have been taking place and the laws with regards to payroll taxes and whatnot. So hopefully everybody's getting these documentation still and they're accurate and everything is, you need those documentations because those are gonna be given to the IRS and they're gonna match it up on their side. And so examples of the W-2, the 1099 miscellaneous and 1099 NEC include unemployment compensation. The IRS is seeing situations where people are not including unemployment compensation they received in 2021 on their tax returns. Well, I wonder why, why would that be? Because they changed the law in the prior year. See every, you know, the tax law is supposed to be somewhat consistent, right? So if they, and it has been generally, they make changes, but you know, if you make these one-off changes every year, people get confused because last year they made this exception for the unemployment and so on. And so now this year people are going on last year's rules because not everybody, you know, reads the IRS news every day. So that's gonna, you know, so if you don't report the unemployment compensation this time, then in 2021, then that could delay things. But if you look back to your 2020 tax return, there may be an exclusion for it because they did a special, special thing. So although a special law allowed taxpayers to exclude unemployment compensation from taxes in 2020, it was only for that year. Unemployment compensation received in 2021 is generally taxable. So taxpayers should include it as income on their tax return. Double check name, date of birth and social security number entries. Taxpayers must correctly list the name social security number SSN and date of birth for each person they claim as a dependent on their individual income tax return. Enter each SSN social security number and individuals name on a tax return exactly as printed on the social security card. If a dependent or spouse does not have and is not eligible for a social security number, list the individual tax identification number, the I-10 instead of the SSN. Double check routing and account numbers. Requesting direct deposit on a federal refund into one, two or even three accounts is convenient and allows the taxpayer to access their money faster. Make sure the financial institution, routing and account numbers entered on the return are accurate. Incorrect numbers can cause a refund to be delayed or deposited into the wrong account. That wouldn't be good. Taxpayers can also use their refund to purchase US savings bonds. Mail paper returns to the right address. Paper filers should confirm the correct address for where to file on irs.gov or on form instructions to avoid processing delays. Note that processing paper tax returns could take much longer than usual. So again, if you want the refund, the paper tax return probably isn't the way to go. But if you owe money and just write them the good old physical paper check and a tax return, if they don't hit you with the penalties and interest and they don't get around to cash in that check, for like the next millennia, then because of the pile of unprocessed returns that's infinitely long at this point. So, but it's still kind of nice to see that they received it. So I still kind of like to just pay the taxes and hope they don't just lose the tax return and then charge me penalties and interest or something like that. In any case, taxpayers and tax professionals are encouraged to file electronically if possible, sign and date the return. If filing a joint return, both spouses must sign and date the return. E-filers can sign using self-selected personal identification number up hand. Taxpayers should review the special instructions to validate their 2021 electric tax return if their 2020 return has not yet been processed. Keep a copy when ready to file, taxpayers should make a copy of their signed return and all schedules for their records. Request an extension if needed. Taxpayers who cannot meet the April 18th deadline can easily request a six month filing extension, extension, not extinction, it's an extension on October 17th and prevent late filing penalties. So use a free file or form 4868. There's a link to that here. But keep in mind that while an extension grants additional time to file, tax payments are still due April 18th for most taxpayers.