Many US taxpayers rush to complete their tax returns, especially in the event they are owed a refund by the IRS. A recent article published by Forbes.com provides 7 reasons to resist the urge to race to get your tax return filed. In short, if you are absolutely certain that you have all of the W-2’s, 1099’s and reporting for all sources of income you must report and are convinced your return is correct, file it.
However, in today’s complex financial world things may not always be that simple. One of the key issues relates to 1099’s – a form for reporting almost any type of commercial relationship that involves payment of more than $600 from one party to another in 2014. 1099’s are often generated by banks who agreed to a “short sale” (for the difference between the amount received and that which was owed). 1099s can be issued for a variety of reasons including someone renting your garage, payment from a homeowner to someone who has done work on their house, babysitting, or compensation of anything more than $600 in all of 2014 in exchange for services.
1099’s are supposed to be received by January 31, but many sources are late and if you race to file a return you may miss a critical piece of information such as interest on your bank account or numbers from a late 1099. You may discover another deduction you missed and wish to receive the additional refund you believe you are owed. Once a return has been filed, all corrections must be submitted on an “ammended” return. Forbe’s notes two important facets of ammended returns: they must reflect all known changes (positive or negative), and ammended returns have a much higher likelihood of an IRS audit. Ammended returns often generate additional interest and penalties based upon changes to the underlying data.
If you own a business interest in an LLC, S Corporation or C Corporation you will need to ensure that all business reporting is complete and that your filings are based upon accurate and complete numbers. It may be tempting to submit that return as soon as possible in order to receive the expected refund, but the old master craftsman saying of “measure twice, cut once” is good advice when it comes to tax returns as well.
