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Made a Mistake on Your Tax Return. Now What?

Mistakes on tax returns are more common than you might think. Taxes can be tricky, and the paperwork? Well, it’s not winning any “simplified process” awards. If you’re filing taxes on your own, the chances of making a mistake can feel even higher. And that’s assuming you’re dealing with a regular year, IRS-wise.

Now, 2024 might seem like a smoother ride compared to the upheaval of the Tax Cuts and Jobs Act years ago, but things still get complex fast. If you’ve just realized you made a BIG mistake on your tax return this year, take a deep breath. It happens more often than you’d think. The good news? There are clear steps to take, and you’ve got time to sort things out.

💡 Fixing Tax Return Mistakes: Your Game Plan

All told, you have three years from the date that you originally filed your tax return (or two years from the date you paid the tax bill in question) to make any corrections necessary to fix your mistakes. If nothing about your return ultimately changes, you probably don’t have anything to worry about — in fact, there’s a good chance that the IRS will catch the mistake and fix it themselves. This is especially true in terms of math errors, or if you’ve left out an important document. The IRS will probably send you a letter letting you know what happened and what you need to do to correct it.

If fixing the mistake ultimately results in you owing more taxes, you should pay that difference as quickly as possible. Penalties and interest will keep accruing on that unpaid portion of your bill for as long as it takes for you to pay it, so it’s in your best interest to take care of this as soon as you can afford to do so.

If you’ve made a much larger mistake (like if you understated or overstated your income, for example), you’ll need to file what is called an amended tax return. This is essentially your “second chance” at getting things right, and the timetable above still applies. Understand, however, that ALL errors must be corrected in the amended return. This means that if you find three errors that will reduce your tax liability and two that actually increase it, you are legally required to correct all five. You can’t correct only the mistakes that benefit you.

An amended return can be used to correct a variety of issues, including but not limited to ones like:

📌 Overstating or understating your income
📌 Choosing the wrong filing status
📌 Fixing errors related to dependents
📌 Adjusting deductions or tax credits

If these issues apply, don’t hesitate — file that amended return and get back on track.

While an increase in your tax bill can be stressful, it’s crucial to understand that even major tax return mistakes don’t have to be a disaster. The IRS knows mistakes happen, and they’ve put processes in place to help taxpayers like you make corrections.

❓ Why a CPA Can Be Your Best Ally

This experience shows how invaluable it is to work with a financial professional when filing your taxes. Let’s be honest — your life is busy, and staying on top of every little tax law change isn’t exactly a top priority. But for a CPA, it’s the job. With their help, you can avoid future mistakes, saving you time, stress, and possibly more tax-related headaches.

Don’t let tax return mistakes keep you up at night!

At Insogna CPA, we specialize in helping taxpayers like you avoid these issues altogether. Want to make tax season smoother next year? Reach out today, and let us take care of the details so you can focus on what matters most — your life, your business, and your peace of mind.

Business partnerships: What is a partnership?

Navigating the complexities of business partnership taxes is crucial for every partnership entity. Staying compliant while optimizing your tax strategy can make a world of difference for your business’s bottom line.

Here’s a quick guide to help you better understand your tax obligations as a business partner in 2024.

Essential insights into the key aspects of business partnership taxes:

💡 Definition of a Business Partnership for Tax Purposes:

Clarification on what constitutes a business partnership under IRS rules.
Differentiating between general partnerships, limited partnerships, and limited liability partnerships.

💡 Tax Filing Requirements for Partnerships:

Overview of IRS Form 1065, the standard tax return for partnerships.
Explanation of the annual filing deadline and requirements.
Guidance on quarterly estimated tax payments.

💡 Understanding Partnership Income Distribution:

How partnership income is reported and taxed.
The concept of “pass-through” taxation and its implications for partners.
Distribution of profits and losses among partners.

💡 Deductible Business Expenses for Partnerships:

Identification of common deductible expenses for partnerships.
Understanding limitations and special considerations for deductions.
The impact of deductions on partnership taxable income.

💡 Partnership Agreements and Tax Implications:

The role of partnership agreements in defining tax responsibilities.
How different partnership structures can affect tax liabilities.
Legal considerations and the importance of professional advice.

💡 Audits and Compliance for Partnerships:

The IRS Targets the Big Fish – Are You on the Radar?
Navigating Partnership Compliance Requirements: What You Need to Know
Risk factors and triggers for IRS audits of partnerships.
Best practices for maintaining compliance and record-keeping.
Handling audits and disputes with tax authorities.

Stay Informed

Keeping up with partnership taxes in 2024 requires consistent attention. Business partnership tax laws can evolve, and staying informed is crucial for your success. Whether you’re a new partnership or a seasoned one, it’s always wise to seek professional advice to navigate the intricacies and stay ahead of potential challenges.

Feeling overwhelmed with business partnership taxes?

Don’t worry—you’re not alone. We specialize in helping partnerships like yours navigate the complexities of tax compliance. Let’s chat about how we can simplify your tax strategy, so you can focus on growing your business. Contact us today for personalized advice that fits your unique partnership!

2024 Tax Preparation Checklist: Documents To Gather Before Filing

Before you dive into preparing your income tax return, check out our updated 2024 Tax Preparation Checklist. It’s a simple guide to help you streamline the process. Not every section will apply to you, so feel free to skip what doesn’t. By organizing your tax documents ahead of time, you’ll save yourself time (and stress) when it’s time to file.

Before You Start Tax Preparation:

1️⃣ Download and print the checklist.
2️⃣File it—either place it inside a folder or attach it to the outside.
3️⃣ Organize your tax documents as they come in. Check them off the list as you go.
4️⃣Scratch off irrelevant items from the checklist—it’s laid out by the most common tax documents first.
5️⃣ Add missing information, like bank routing/account numbers for direct deposit.
Use Quicken® or another financial tracker? Print out your annual report—it’s a game-changer for simplifying your tax prep.

Having a financial summary in hand beats digging through your bank statements for hours. Highlight key details in the report that you’ll need or jot down notes for reminders.

Personal Information:

The IRS needs to know exactly who’s filing and who is covered in your tax return. To do this, you will need Social Security numbers and dates of birth for you, your spouse, and your dependents.

Information About Your Income:

💡 Income from jobs: Forms W-2 for you and your spouse
💡 Investment income: Forms 1099 (-INT, -DIV, -B), K-1s, stock option details
💡 Refunds/unemployment income: Forms 1099-G
💡 Business/farming income: Profit/loss statement, capital equipment info
💡 Rental property income: Profit/loss statements, expense details, rental property tax info

Adjustments to Your Income:

Certain deductions can lower your taxable income, possibly leading to a higher refund (or a smaller bill). Keep documentation for:

📌 IRA contributions
📌 Student loan interest
📌 Health Savings Account contributions (HSA)

Itemized Deductions & Credits:

Make sure you get every deduction and credit you’re eligible for. Here’s what you’ll need:

✅ Child care costs: Provider’s tax ID, address, and amount paid
✅ Education costs: Form 1098-T and receipts for expenses
✅ Charitable donations: Cash contributions, value of property donated, and mileage driven
✅ Medical and dental expenses: These can often be overlooked, so make sure you track them.

Taxes You’ve Paid:

Make sure you don’t pay more than necessary by documenting:

📌 State and local income taxes paid
📌 Real estate taxes paid
📌 Personal property taxes (like vehicle license fees)

Other Important Info:

💡 Estimated tax payments made throughout the year
💡 Direct deposit info (routing/account numbers)
💡 Foreign bank account info if applicable

Getting organized with your tax preparation checklist isn’t just about avoiding last-minute panic—it’s about saving time and making the process as painless as possible. Plus, it increases the chances of maximizing your return.

Need a hand with this year’s taxes?

Let’s chat! We can guide you through every step and make sure nothing falls through the cracks. Let’s make 2025 the year of stress-free filing.

What triggers an audit by the IRS?

With tax season behind us, many are finding unexpected IRS notices in their mailboxes. While seeing the IRS letterhead can cause a spike in anxiety, the good news is that most of these notices are routine. In fact, many are computer-generated, alerting you to unpaid taxes or simple mistakes on your return that can be easily fixed. Just because you’ve received an IRS notice doesn’t necessarily mean you’re facing an audit.

In reality, fewer than 1 percent of individual tax returns are selected for an audit. That’s about a 1-in-160 chance. However, according to the Taxpayer Advocate Service, 6.2 percent of tax returns—or a 1-in-16 chance—are flagged for closer examination. Some of these “audit flags” don’t result in a full audit but may still require extra documentation to clear up.

Given the millions of tax returns filed each year, the chance of facing an IRS tax audit is slim. However, if you’re curious about why your return may have been selected or what raises the likelihood of being audited, here’s a breakdown of the common risk factors involved in the IRS audit process.

❗ These Risk Factors Increase Audit Chances:

1️⃣ You were randomly selected.
The IRS always audits an incredibly tiny sample of tax returns, but the likelihood is still extremely low. But if you are low or middle-income with a relatively simple tax filing situation and wondering why you’ve been audited, you were part of that tiny random selection.

2️⃣ Common audit flags on your return.
Even if you have legitimate deductions, credits, and income substantiation, there are certain lines on your tax return that are rife with errors and fraud across the board. These include the:

Specific tax benefits prone to error and fraud like the Earned Income Tax Credit have their own separate due diligence process. But the above three items are the most common triggers for an audit, even just partial audits, given the vast propensity people have in underestimating these items and not have them properly documented. People tend to overestimate the value of non-cash charitable contributions and frequently lack the substantiation for these deductions. Adoption is an incredibly long and expensive process, and even though it is a legitimate tax benefit in which the adoptive parents will have substantiation, it also equates to a tax credit that can spread out over numerous years and result in paying little or no tax. Because of this, the IRS flags these tax returns frequently.

The home office deduction is another area where people tend to overestimate both eligible expenses and the percentage or square footage of the home being used for the deduction. This deduction can also generate a business loss, resulting in paying little or no taxes. Because of this, the IRS is likely to flag tax returns that have suspiciously large home office deductions.

3️⃣ Someone reported you to the IRS.
The IRS has a whistleblower programthat awards up to 30 percent of the taxes collected and resultant penalties. If your ex-spouse suspects that you fudged your Goodwill donations or that co-worker who doesn’t like you overheard you say, “They never check!” with respect to that side hustle you didn’t report, it’s possible they could’ve anonymously tipped you off to get a quick payday.

4️⃣ You’re a small business owner or freelancer connected to someone being audited.
Even if your client, supplier, or other business associate was not committing tax fraud or malfeasance but simply got audited, people and companies that they paid or received money from are likely to be next. If they didn’t correctly report payments made, the IRS will want to see how the payers’ or recipients’ tax returns also match up.

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Need Help?

If you’ve received an IRS audit notice or are worried about one, don’t stress. Our tax experts can guide you through the process and resolve it as quickly as possible. Call us today for personalized assistance in handling your IRS tax audit.

Tax Benefits for Members of the Military in 2024

Military members benefit from a variety of special tax benefits. These include certain non-taxable allowances, non-taxable combat pay, and a variety of other special tax provisions designed to support those who serve.

Prominent Military Tax Benefits

💡 Service Member Residence or Domicile
A frequent question by service members is, “What is my state of residence for tax purposes?” since one’s duty station may change multiple times while serving. Luckily, the government passed a law to solve this issue. A service member continues to retain his or her home state of residence for tax purposes, even when required to move to another state under military orders. This also applies to other tax jurisdictions within a state, such as city, county, and personal property taxes. Thus, a service member will continue to file tax returns for his or her home state and not the state where he or she is stationed.

💡 Service Member Spouse’s Residence or Domicile
To simplify the tax-filing requirements of military couples, the Military Spouses Residency Relief Act of 2009 allows military spouses to claim the same state of domicile as their service member for tax purposes, provided they had also established domicile there.

For example, if Chris resides in California with his spouse, who is in the military, and Chris has earned income in California but had established domicile with his military spouse in Virginia, Chris would be subject to Virginia income tax laws instead of California’s. The couple would only need to file one state return – in this case, Virginia. There would be no obligation to file a California return.

Unfortunately, spouses who hadn’t established domicile in the same state as their service member spouse and who had earned income in the state where their spouse was stationed were still forced to file with both states (assuming both states have income tax).

💡 New for Years Beginning in 2018
Thanks to the Veterans Benefits and Transaction Act of 2018, an individual married to a military member now has more choices. Under the act, a spouse can elect to have the same state of domicile as their service member spouse, even if they didn’t previously have the same domicile. If the non-military spouse doesn’t make that election, they can continue to choose to file in their own domicile state.

Making these choices can significantly impact the amount of state tax the spouse might have to pay. For instance, a spouse of a service member stationed in a high-income-tax state can elect to use the state of residency of the service member, especially if that state has no or low income tax, and avoid the taxes where the spouse is stationed.

⚠️ Be Cautious
It can be tempting for a service member or their military spouse to declare their state of domicile as a state without any state income tax, like Texas, Nevada, or Florida. However, doing so without any real connections to the state can cause complications down the line.

💵 Non-Taxable Allowances
While all pays are taxable, most allowances are tax-exempt. The primary allowances for most individuals are BAS (Basic Allowance for Subsistence) and BAH (Basic Allowance for Housing), which are tax-exempt. Conus COLA is one allowance that is taxable. A law change mandated that every allowance created after 1986 would be taxable. Conus COLA, authorized in 1995, became the first taxable allowance. Tax savings can be significant as BAS and BAH average over 30% of a member’s total regular cash payments. In addition to being tax-exempt from federal and state taxes, these allowances are also excluded from Social Security taxes.

Need Help?

Want to ensure you’re making the most of your military tax exemptions and other tax benefits? Let’s take the confusion out of your tax situation—reach out to us today for personalized guidance!

Tax Breaks for Parents in 2024: What You Need to Know

Summer just ended and if you’re a working parent, there’s a valuable tax break you should keep in mind for the next summer season.

Many working parents need to arrange childcare for their kids under 13 (or any age if disabled) during the school break. One popular option that comes with a tax perk? Day camps! The cost of day camps can be counted as an expense for the Child and Dependent Care Credit. However, keep in mind that overnight camps and summer school or tutoring programs don’t qualify.

💵 Expense Qualifications

For an expense to qualify for the credit, it must be an “employment-related” expense; i.e., it must enable you and your spouse, if married, to work, and it must be for the care of your child, stepchild, foster child, brother, sister or stepsibling (or a descendant of any of these) who is under 13, lives in your home for more than half the year and does not provide more than half of his or her own support for the year. Married couples must file jointly, and both spouses must work (or one spouse must be a full-time student or disabled) to claim the credit.

The qualifying expenses are limited to the income you or your spouse, if married, earn from work, using the figure for whoever earns less. However, under certain conditions, when one spouse has no actual earned income and that spouse is a full-time student or disabled, that spouse is considered to have a monthly income of $250 (if the couple has one qualifying child) or $500 (two or more qualifying children). This means the income limitation is essentially removed for a spouse who is a student or disabled.

For 2021 only, the total expenses that you may use to calculate the credit may not be more than $8,000 (for one qualifying individual) or $16,000 (for two or more qualifying individuals). This limit does not need to be divided equally.

The credit reduces a taxpayer’s tax bill dollar for dollar. However, the credit can only offset income tax and alternative minimum tax liability, and any excess is not refundable. The credit cannot be used to reduce self-employment tax or the taxes imposed by the Affordable Care Act.

If the qualifying child turned 13 during the year, the care expenses paid for the child for the part of the year he or she was under age 13 will qualify.

Need Help?

Tax season shouldn’t add more stress to your busy schedule as a parent. Let’s simplify it! Contact us today, and we’ll help you take full advantage of the tax breaks that benefit working parents like you in 2024.