It’s been a while since I wrote about taxes. But, there’s only 10 days to get your taxes in to the IRS before the due date. (Yes, this year, it’s the 18th, due to holidays.)
And, I bet you have no idea I have been doing taxes for nearly 60 years now. That’s right- I started doing taxes when I saw my dad’s accountant-produced 1040 and his and my uncle’s 1120. There wasn’t a mistake per se- but there were missing deductions. Moreover, I was amazed at the price they paid for those returns. (Yes, I had the desire to earn money at a very early age.)
Anyway, I fixed the returns. Oh, wait. My uncle was leery of submitting my changes; after all, he had used an accountant and I was just a kid.
My father, on the other hand, recalled my recognizing the mistake they were making with some blueprints that eventually were used to make their firm millions of dollars a year. So, he trusted me and sent in my version of the tax return. (And, had me do the family return for years afterward.)
Since then, I’ve been preparing taxes for businesses, trusts, non-profits, and individuals. This past year- despite the fact that I was in bed for most of the season- I processed hundreds of returns. (No, I won’t share the real total.)
This year- even though I still can’t drive and visit clients- I’ve processed more than that as of this writing. And, if all goes well, there will be more than 40 score returns tallied. (Thankfully, only one return was mailed in. The client was extremely stubborn- and extremely wrong- to do so.)
Which is why I will be offering y’all some advice if you are going to do your taxes yourself. (‘Yourself’ no longer means using a pencil and paper, but availing yourself of the canned programs that abound- whether its TurboTax, H&R Block, Taxslayer, or another of the ilk. Each of them have plusses and minuses, but the contention is that Intuit’s TurboTax is best. I admit to being biased, but that’s a long story, too.)
Here’s a common situation. One that shouldn’t be- but is.
For you to file your taxes electronically (don’t do it any other way- please!), the IRS requires you to provide the adjusted gross income (AGI) for the 2020 taxes. And, therein lies the rub!
Too often, you carefully enter the AGI and the IRS rejects your return. You become dumbfounded, look up the number again, and even more carefully enter the exact digits. Press submit- and minutes later find you are rejected yet again.
Think for a second. Did you mail in your 2020 tax return? Don’t think that just because the IRS cashed your check that they processed your return. What the IRS really does is strip out all the checks from tax returns submitted and then add your tax return to the pile. Odds are it’s among the 10 million or so documents the IRS hasn’t processed yet.
Which means the IRS thinks you have NOT filed your 2020 tax return. And, that also means you need to enter $ 0 as your 2020 AGI. Because the IRS has no record of your return. So, you enter $ 0 as last year’s AGI. Whoosh- your tax return is processed and approved.
Or, maybe not. Maybe you didn’t file your tax return last year. Instead, you registered for the advanced child tax credit payment. Or, attempted to obtain the third stimulus payment. So, the IRS does have a record of you- but not of your tax return. In this case, you have to enter $ 1 for the 2020 AGI.
Yeah, I know that makes no sense. But, what do you care, if the IRS processes your 2021 tax return now?
Here’s a third condition. You did file your 2020 tax return, and amended it because you forgot a W2 or a 1099. That amended return had a $ 43,522 Adjusted Gross Income. But, that doesn’t work when you plug it in for last year’s AGI. Because the IRS hasn’t processed your 2020 Amended Tax Return. Instead, go find your original tax return, the one that shows your AGI to be $ 39,238. Plug that in- and voila, your 2021 tax return is now accepted.
There’s one other scenario you need to know. And, this one may NOT let you file your tax return electronically, but will start the ball rolling to get you out of problems. (There are two avenues here.) That’s when the IRS notifies you that a tax return has already been filed for your social security number.
One case occurs if you are a kid (ok, under 30). Ask your parents if they elected to file their tax return including your data. That means you need to file your tax return stating that you are a dependent of another. And, take a hit on the taxes due.
(Yes, you can demand your parents’ modify their tax return, removing you from their filing. But, the IRS will not process that change in time for you to file electronically. If you are still getting a refund, file as the dependent of another. And, demand your parents file an amended tax return, as will you. They will take a financial hit, but you will get your money. Or, you could be a sport, and let them keep the funds this year- warning them never to do that to you again.)
Here’s the other scenario to that “you’ve already filed” situation. Someone did file a tax return using your social security number. Which means you need to file Form 14039, the Identity Theft Affidavit. That- along with your paper tax return- gets mailed to the IRS. And, they will process it….eventually.
Yeah, that’s not satisfying either, but it’s the best you can do. (Or, you could hire us- we could expedite the resolution…)
Here’s to a great tax season for you. And, a great one for us!
