With so many rules to follow, filling out a tax return that's entirely free of errors can be a challenging task. In fact, the Internal Revenue Service receives a large number of returns each year with math errors. If you make a math error on your return, you might take comfort knowing that it's one of most common mistakes people make. But nonetheless, your IRS refund payment may be delayed, or you could still have to pay the additional tax if the error was your mistake.
Thanks to a variety of sophisticated technology, the IRS can spot mathematically errors on your tax return relatively easy. In fact, the vast majority of errors such as these are caught during filing season each year.
Math Errors Frequently Caught by IRS
Filing a tax return with one or more math errors can result in reporting the wrong amount of tax you owe for the year, but it doesn't always. It all depends where on the tax form you make the error. Luckily, the IRS has procedures in place that allow it to check the math on all of the returns it receives. The Treasury Inspector General for Tax Administration – a government agency that oversees the IRS – did a study on tax error reporting in 2011 and found that the IRS was able to catch math errors on approximately 8.6 million returns that were filed during the 2010 tax season. Moreover, 98.4 percent of those returns that the IRS corrected were accepted, or undisputed, by the taxpayers who filed them.
Will the IRS Correct My Return?
Math errors on your tax return are much more likely if you do the calculations yourself using a paper return. In fact, 21 percent of paper returns have errors, while only a half-percent of returns using e-file have any errors at all.
Correcting a tax return's math errors doesn't require an audit, nor does it increase your chances of being selected for one. The IRS only considers certain mistakes as minor math errors that it's permitted to correct without having to notify you first. Adding, subtracting, multiplying or dividing something incorrectly on your return is a very common math error that the IRS frequently corrects. Other mistakes that are considered math errors include entering different figures for the same item on your tax forms, applying the wrong tax-rate tables to your taxable income and inadvertently taking a deduction for more than the law allows, for example.
What to Expect from the IRS
Soon after the IRS catches and corrects an error that results in an additional unreported tax liability, whether it decreases your refund or increases the amount you have to pay, the agency will send a notice to your address. If you disagree with the correction and the additional amounts of tax assessed, you have 60 days to dispute it. But if you agree – as most people do – you'll either pay the tax or just accept a smaller refund, whichever the case may be.
Catching the Error Before the IRS
In the event you discover the mistake before the IRS does, the agency advises you to wait until your return is processed before amending the return, since it's likely that the IRS will make the correction for you. But if the math error isn't caught by the IRS within approximately three months of filing the return, you may want to consider filing an amended return on 1040X so that you can be sure the agency has an accurate return on file for you or call the IRS toll free number for further instruction.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.