Why Would My State Income Tax Be Reviewed?

States can hold and review your income tax returns for a number of different reasons.
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If you get a notice that your state tax return is under review, don't panic – it might just be a random selection and you'll be processed and approved with no penalties, fines or lengthy audit. In some cases, you might have made a small mistake filling out your return.

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If you have things going on with your personal finances, such as your wages being garnished or paying a previous year's taxes with an installment plan, that can delay things. If you ever find your federal or state income taxes being reviewed, wait until you hear from the taxing body to find out what you'll need to do.

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You Made a Mistake

If you make a simple mistake like filling out your address or phone number incorrectly, that shouldn't trigger a review – taxing bodies use your Tax Identification Number to identify you. TINs include Social Security Numbers or Employer Identification Numbers (if you own a business).

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If you check the wrong filing status, such as single when you're filing as a couple, that might cause a delay. If you're doing your own taxes, set them aside for a day or so and go over them start to finish when you have a fresh set of eyes to make sure you've filled out all of your forms correctly. Even if you don't need a tax preparation service, it might be a good idea to spend a small amount of money to use a service to check your return.

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You Have an Installment Plan

If you owe taxes and can't pay them, you can contact your state or the IRS and ask to set up an installment plan. This allows you pay a small amount of money each month until you have paid your debt. You can often play less than ​$50​ per month, depending on your financial situation, and stretch your payments out over years.

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If you are paying an installment from a previous year and now have another tax liability (you owe money this year), even if you are able to pay this year's taxes and include the payment with your return, your return might get flagged for review. In some cases, the taxing body will simply re-confirm your installment agreement and you'll keep making the same monthly payments.

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You Have Other Issues

If you have had a judgment against you and your wages are being garnished to pay someone a debt you owe them, the state might review your tax return to check on the status of your payments. If you make income selling online, sales tax issues can cause an audit in your state. If you are behind on child support payments, the state might pull your return, set it aside and assign it for review.

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If you are trying to claim multiple tax credits and dependents and your income is too high, that will trigger a review. When a divorced or separated couple both claim head of household status for the same child or children, this is a problem. Do you have foreign income or rental income losses? These factors can trigger a review, explains USA Today.

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