How To Handle Past Mistakes When Preparing Your Tax Returns in 2023

For many taxpayers, preparing their annual income tax returns involves reviewing what they did in prior years. While this can be a good way to streamline the process, it can also uncover evidence of past filing mistakes.

Two Options for Correcting Tax Mistakes from Prior Years

Although uncovering past filing mistakes isn’t fun, it is better to uncover them yourself than to have the Internal Revenue Service (IRS) uncover them for you. If you uncover past mistakes when preparing your (or your company’s) tax returns in 2023, you have two main options available:

1. File an Amended Return (IRS Form 1040X)

In many cases, the best option for correcting past mistakes when preparing your (or your company’s) annual tax return is to file an amended return. Individual and corporate taxpayers can use amended returns to correct various types of mistakes, including:

• Math errors
• Failing to report taxable income
• Choosing the wrong filing status
• Claiming invalid deductions
• Claiming exemptions or credits for which you (or your company) were not eligible

When you discover a past filing mistake, it is important to correct the issue promptly—do not wait until you submit your (or your company’s) annual filing to submit an amended return. Not only will penalties and interest continue to accumulate, but waiting to file an amended return can also increase the risk of facing an IRS audit.

2. Submit a Streamlined Filing

Another option for correcting certain types of filing mistakes is to use the IRS’ Streamlined Filing Compliance Procedures. Specifically, taxpayers can use streamlined filings to correct past mistakes related to the disclosure of offshore accounts and other foreign financial assets. Crucially, however, taxpayers can use the Streamlined Filing Compliance Procedures if they can certify that their mistake was “non-willful.” When taxpayers cannot make this certification, they are ineligible to submit a streamlined filing and must choose another option.

While filing an amended return and submitting a streamlined filing are two of the main options for correcting a past filing mistake, they are not the only options available. If you are dealing with a past filing mistake, to make sure you choose the best option, you should consult with an experienced tax attorney.

What If You (or Your Company) Can’t Afford to Pay?

Sometimes, individuals and companies that have underpaid their federal tax liability will also run into the problem of being unable to pay. If you cannot afford to pay what you owe, you have options in this scenario as well. In addition to helping you choose how best to remedy your (or your company’s) filing error, an experienced tax attorney can also help you choose the best option for dealing with your current inability to pay.

Request a Confidential Consultation with Managing Partner Kevin E. Thorn

If you need to know more about correcting a past filing mistake during the 2023 tax season, we invite you to get in touch. To request a confidential consultation with tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 202-349-4033, email ket@thornlawgroup.com or inquire online today.