Mistake on Your Tax Return? Now What?

Tax-filing season is a stressful and confusing time for a lot of people. If you are like me, you feel a sense of accomplishment and relief when your tax return is finally completed and sent off to the IRS. But what do you do if you realize you made a mistake and the tax return you sent was incorrect?

Don’t feel bad, it’s actually a fairly common occurrence and no wonder. According to Wolters Kluwer, CCH; global provider of tax, accounting, and audit information, there are over 73,954 pages explaining the U.S. federal tax code! 

If the mistake you discover is a math error or if forgot to send in a form such as your W-2 or schedules, the IRS says not to worry about it. You do not need to send in an amended return. They will catch the math error and send you a request for any missing forms. However, if the mistake you made is regarding your filing status, number of dependents, total income, tax deductions, or if tax credits were reported incorrectly or omitted, an amended tax return needs to be filed.

When filing an amended return do not use the standard Form 1040, that will just confuse the IRS—and no one wants that. Use the Form 1040X (Amended U.S. Individual Income Tax Return) when filing your amended return and mail it in. You cannot e-file the Form 1040X.

Don’t let the thought of filing an amended tax return scare you.

The 1040X is actually fairly straightforward. It has three columns. Column A shows the figures from your original return, column B shows the changes you are making, and column C shows the corrected amounts. There is also a place on the back of the form where you can provide, if necessary, an explanation of the changes.

If you are expecting an additional refund after filing the amended return, the IRS says to wait until you have received your original refund before filing the Form 1040X—but you can go ahead and cash your refund check while waiting for your additional refund.

Typically, you have 3 years from the date you filed your original tax return or 2 years from the date you paid the tax—whichever is later—to claim your refund.

If your amended tax return indicates you owe additional money, file and pay the additional tax as soon as possible to limit interest and penalty charges. If there is a reasonable explanation as to why you are late paying the additional tax, make sure you fill out the area on the back of Form 1040X indicating why you are late. The IRS may forgive some of the penalties.

Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 10 years.

 

Americans Are Confident Regarding Their Financial Future, But Should They Be?

As we discussed in a previous blog, April is Financial Literacy Month.  NerdWallet, the personal finance website for consumers, and The National Foundation for Credit Counseling (NFCC) weighed in on this topic by releasing the results of their 2015 Financial Literacy Survey.

More than 2,000 adults responded to the online survey and a whopping 92 percent said they are very or somewhat confident in their most recent big financial decision (e.g. refinancing a mortgage, buying a car, or picking a credit card). And almost two out of three said they deserve an “A” or a “B” for their own personal financial knowledge.

However, 70 percent of these same people said they are currently worried about their finances. And it’s no wonder since the survey showed: 60 percent spend without the benefit of a budget, 20 percent spend more than they make, and 60 percent do not have a rainy day fund.

“These findings portray a bigger picture of the financial literacy knowledge American’s lack today,” said Cliff Goldstein, personal finance analyst for NerdWallet. “When we asked respondents where they save or invest their money, we were shocked to find out that, although 65 percent of Americans use a savings account, less than three in ten use potentially higher-yielding investment vehicles such as 401(k) (29 percent) or IRA (25 percent).”

Only 6 percent of those surveyed feel their student loans were a good investment.  “Many Americans are spending their adult lives slowly chipping away at a mountain of student loan debt only to find themselves approaching retirement later in life with little or no savings,” said Susan Keating, president and CEO of the NFCC. “The stakes are too high for consumers to let misplaced confidence get in the way of sound financial decisions.”

Think about your own financial literacy. I’m going to leave you with this one question.  In the immortal words of Joey Tribbiani, “How you doin’?”   

Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 10 years.

 

Clean Up Your House, Clean Up Your Debt

April is National Financial Literacy Month and it’s no wonder, American’s seem to be illiterate when it comes to their finances. Based on an analysis of Federal Reserve statistics and other government data, Nerdwallet reported that in December 2014 the average U.S. household owed $7,283 on their credit cards. On a greater scale, American consumers owed: 11.74 trillion dollars in total debt, 8.14 trillion dollars in mortgages, 882 billion dollars to credit cards, and 1.13 trillion dollars to student loans.

Credit card debt, the third largest source of debt, has actually decreased, unfortunately the decrease seems to be due to defaults rather than repayment. And if that’s not bad enough, the U.S. Department of Education reports that one-third of borrowers with federal student loans are late paying those loans.

So what’s a consumer to do? Budgeting is a good place to start. Back in May 2014 I posted a blog that can get you started. It’s called Money Worries? Organization is Key. Once you get organized and on a budget, you can begin to whittle down your debt.

Does your employer offer a 401(k) plan? Many employers offer matching contributions on a percentage of what you put into the plan. Make sure you take advantage of these offers. That’s free money people. Who doesn’t want free money?

Be mindful when you buy something, it’s not always the big purchases that’ll do you in. Benjamin Franklin once wrote: “Beware of small expenses, a small leak will sink a great ship.”

Take advantage of your spring cleaning. When you are cleaning out rooms and closets, look for items you haven’t used or clothing you haven’t worn in a while, stockpile them and then have a garage or an eBay sale. Get the kids involved too, there is certainly a market for their old toys, books and games. You might be amazed by how much money you can make by getting rid of items that are cluttering your home. You know what they say, one man’s junk is another man’s gem. And what doesn’t sell can always be donated to Goodwill or another charity. Remember to get a receipt if you want to itemize your donations for a money saving tax deduction. You might as well help others while you help yourself.

Decreasing what you spend on utilities is another way to find money to pay down your debt. This can be done a number of ways. Replacing your existing light bulbs with LED bulbs can really make a difference. They are more expensive initially, but will save you a lot of money over time. Are you changing the filters on your furnace? Is your dryer vent free of lint? Are the coils on your refrigerator cleaned regularly? Are you insulating your hot water heater? Keeping these major appliances clean and well maintained will help them run more efficiently and that will save you money.

Before going to the grocery store, make a meal plan and then a list. You might be surprised by how much money you can save by only purchasing what you need for the week. And whatever you do, don’t go grocery shopping hungry!

April may be Financial Literacy Month, but any month is a good month to learn about your finances. That’s why Money Management International has put together a website financialliteracymonth.com that offers 30 steps to financial wellness. You can start the steps on any day of any month.

Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 10 years.