Some people view the IRS as an evil entity there to rob them out of their hard-earned money. As with any organization though, the IRS is there to do a job and/or perform a service. Their particular service is the collection of outlined taxes and enforcing of the tax code.
Yet, many people still fear the IRS. But why? I don’t. I’ve been doing my own taxes since the ripe old age of 16. And if the IRS comes calling, I know they aren’t my enemy and are free to sit down with me and review my taxes. Heck, they might even find a mistake as they’ve done in the past. But not every tax mistake ends up costing me money.
Taxes can be complicated, but they don’t have to be
Many of the people I know don’t have the most complicated tax filing situation. They have one main source of income, they may or may not have a mortgage, they put money into an employer-sponsored retirement account, and they might have some savings that accumulate interest each year. Other than that, their financial lives are pretty straight forward.
I’d also say that in most cases they could probably file the 1040EZ form in about 15 or 20 minutes if they’d just take the time to sit down and look it over. But instead, they take their information to tax preparers and pay hundreds of dollars to do the work for them just because they think taxes are hard or that they might make a mistake.
And what if they did make a mistake?
My tax mistake made us $500
For those who think the IRS is out to get them, you might want to take note of what I’m about to say. After doing a test run of our taxes in December of last year (before all the tax documents were out), our finances changed slightly. It wasn’t a big difference, but something I had calculated as income during my test-run turned out not to be taxable at the federal level. This altered our final tax draft, which in turn made us eligible for the Earned Income Credit. However, I skipped this portion of our taxes on our final draft due to my previous calculations having already showed me that we were ineligible.
About four months later, I received a letter from the IRS. They weren’t asking for money or telling me I was being audited. Instead, they were informing me that I might be eligible for the EIC. They even let me know they’d run the numbers for me if I didn’t want to do it myself. After all was said and done, we got an additional $545 added to our refund.
An amended form might be an option to fix other errors
When conducting our tax preparations for this year, I realized that there is also an Earned Income Credit portion on our state income tax form. Due to my misstep the previous year, I hadn’t taken this credit, and while the amount wasn’t much (about $40 extra), it was something nonetheless.
Therefore, I filed an amended return – including the documentation the IRS had sent me regarding our eligibility for the EIC – to recoup our lost dollars. The process only took about 20 minutes and taught me how to do something new in relation to our tax filings.
So while the IRS can get a bad rap sometimes, and while I’m not saying it doesn’t have its flaws, it may not be as evil as some make it out to be.
More From This Contributor:
Building a Revenue Producing Blog
I Won’t Be Waiting to Take Social Security
Preparing to Publish My First E-book
The author is not a licensed financial or tax professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.