FAQ: If I Made a Mistake in Last Year’s Taxes, Do I Lose This Year’s Return?

Many people worry about what will happen if they made a mistake in their previous year's tax return. The challenge is not as daunting as it may appear at first glance. To help you better understand this situation, we'll address common concerns and explain the IRS's approach to tax mistakes.

Does the IRS Cancel Your Refund if You Made a Mistake?

No, the Internal Revenue Service (IRS) does not typically cancel your refund simply because you made a mistake. Instead, they will adjust your account if your mistake results in a lower refund or any additional tax owed. This means if your refund is less than expected due to an error, or if you underpaid taxes, the IRS will correct the mistake by either reducing your refund or sending you a notice for additional payment.

Will My Refund Be Intercepted to Pay Past Due Amounts?

While your refund can be intercepted to pay past due amounts, this does not depend on whether you made a mistake or not. It depends on whether you have additional taxes owed from a previous year. If the IRS determines that you have outstanding balances, they may intercept your refund to pay these amounts. This measure is taken regardless of whether you knowingly made a mistake or were unaware of any issues in your tax filing.

How to Correct a Mistake in Your Previous Year’s Return

The key to addressing a mistake in your previous year’s tax return is to file an Amended Tax Return. This can be done even if you have already received your refund. If you discover the mistake in your previous year’s return, whether it was due to miscalculation, missing documentation, or omitted income, you should file an amended return as soon as possible.

The process involves revisiting the information you provided on your original return, making the necessary corrections, and submitting the amended return to the IRS. Keep in mind that you will need to provide all relevant documentation to support your claim for adjustment. Once the IRS reviews your amended return, they will make adjustments to your account and either send you a bill for any additional taxes due or release your refund if it is higher than the adjusted amount.

What If the IRS Discovers a Mistake?

If the IRS discovers a mistake on your return after it has been filed, they will handle the correction themselves. They may send you a notice to inform you of the error and request additional information to support their findings. After reviewing the information, the IRS will adjust your return and either send you a bill for any additional taxes or issue a refund if your mistakes resulted in too much tax being paid.

Tips for Avoiding Tax Mistakes

To reduce the likelihood of making mistakes in your tax return, consider the following tips:

Keep detailed records: Maintain thorough documentation and records of all your income and expenses. This can help you ensure accuracy and make the amendment process smoother. Use tax software: Utilize reputable tax preparation software that can guide you through the filing process and help catch errors before you submit your return. Hire a professional: If you are unsure about the details of your tax situation, consider hiring a tax professional who can provide guidance and help ensure your return is accurate. Review your returns: Before submitting your tax return, take the time to review all the information you have entered. Double-check all numbers and ensure all boxes are properly checked or filled out.

Conclusion

While making a mistake in your tax return can be stressful, it does not automatically mean you will lose any future refunds. The IRS is focused on correcting these mistakes to ensure that all taxpayers fulfill their obligations accurately and fairly. By correcting the mistake through an amended return or having the IRS make the necessary adjustments, you can ensure that any refunds owed to you are processed and any taxes due are paid appropriately.