Federal income taxes operate largely on the honor system. Taxpayers self-report, and the Internal Revenue Service only audits approximately one percent of income tax returns. Because of the large number of people preparing returns, even simple math errors are bound to turn up. In 2012, the IRS caught more than 2.7 million math errors on income tax returns. Depending on the type, an error might impact the size of your refund.
Correcting the Error
Simple math errors don't require taxpayers to file an amended return. Instead, the IRS will recalculate and correct the error as they process your return. When the IRS fixes a math error in your return, it will send you a notice indicating what was corrected and how it impacts your return. Depending on the size of your error, it could change the size of your refund, or result in a tax liability when you were expecting a refund.
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Correcting Your Refund
A notice that the IRS is correcting your refund doesn't require any response on your part, although if you owe additional taxes you'll need to send a payment. It simply informs you that the IRS corrected an error in your return and adjusted the final determination of your refund amount. If the correction resulted in you owing more taxes than you had calculated, you can request an abatement within 60 days. Abatements can provide you with additional time to pay your taxes if you had anticipated a refund but now actually owe additional taxes.
Notice of Deficiency
The IRS could also correct your refund if it issues a notice of deficiency. When you file your taxes, you answer the questions as best you can. Sometimes you and the IRS might disagree with a particular interpretation, and, while you weren't trying to cheat on your taxes, the IRS finds that you misstated your tax liability. Unlike a notice of a math error, the IRS can't attempt to collect on a notice of deficiency until at least 90 days after the notice was mailed, or the Tax Court has made a final decision on the taxpayer's petition.
How to Prevent Errors
Avoid unnecessary surprises by triple-checking your tax return before submitting it. Check that you've correctly copied information from receipts and tax statements, such as your Form 1099, looking for transposed numbers. For example, you might have earned $37,357 on one Form 1099, but reported $33,757 on your taxes. After checking that all your inputs are correct, check your math by recalculating subsequent lines.