How Do You Correct Mistakes on Your 2020 Tax Return?

What should you do if you discover that you made mistakes on your 2020 tax return? If you are asking this question, you are not alone. Many taxpayers discover past filing mistakes when preparing their returns for the subsequent year; and, with all of the turmoil and challenges of 2020, there are plenty of taxpayers who need to correct filing mistakes in 2021. In this article, US International Tax Advisors provides an overview of the five primary options for fixing past filing mistakes.

1. Filing an Amended Return

In most cases, correcting past filing mistakes involves filing an amended return. If you took improper deductions, claimed exemptions for which you were not eligible, omitted tips or other compensation, or otherwise underreported your taxable income, then your best option might be to make an amended filing. However, as discussed below, this won’t be the most appropriate choice in all circumstances.

2. Submitting a Streamlined Filing

For filing mistakes involving disclosure of foreign financial assets, the IRS’Streamlined Filing Compliance Procedures provide a way for taxpayers to come into compliance without the risk of facing an audit or investigation. In order to submit a streamlined filing, you must be able to certify that your past mistake was “non-willful”, and you must be able to pay any amount that you owe.

3. Making a Voluntary Disclosure

The IRS Criminal Investigation (IRS-CI) Voluntary Disclosure Practice is an option for U.S. taxpayers who need to correct willful tax law violations. As IRS-CI explains, “[a] voluntary disclosure will not automatically guarantee immunity from prosecution; however, a voluntary disclosure may result in prosecution not being recommended.”

Due to the risks involved with voluntarily disclosing a violation of federal tax law, taxpayers who are considering a voluntary disclosure need to seek advice from an experienced Maryland IRS lawyer prior to submitting any information to IRS-CI. If your voluntary disclosure is not successful, it could lead to criminal prosecution or tax fraud, tax evasion and/or other tax crimes.

4. Seeking an IRS Settlement Agreement

If you owe back taxes but cannot afford to pay all at once, then your best option might be to seek an IRS settlement agreement. These agreements allow taxpayers to pay their delinquent taxes in installment payments over time.

5. Seeking an Offer in Compromise

Another option for taxpayers who cannot afford to pay is to seek an offer in compromise. If you meet the eligibility criteria for an offer in compromise, then you can settle your tax debt for less than the full amount you currently owe.

Discuss Your Situation with US International Tax Advisors

Are you behind on your federal income taxes? If so, you will need to address the issue promptly. To discuss your options with US International Tax Advisors, please call 844-796-8565 or contact us confidentially online today.