March 13, 2017: The Nine Common Filing Errors

Reporting source: CFED’s Tax Prep Dispatch

An article from CFED:

If you’re on any of the IRS mailing lists for e-news, you probably received the message this week entitled, “Nine Common Filing Errors to Avoid.” This error list refers to all returns filed with IRS, but it got me to wondering how these might apply to VITA and how we can avoid them.

“Missing or Inaccurate Social Security Numbers. Be sure to enter each SSN on a tax return exactly as printed on the Social Security card.”
The SPEC Quality Site Requirements clearly cover verification of the taxpayer’s identity with photo ID and require that the SSN or ITIN be confirmed for everyone on the tax return. That means that for social security numbers the site needs to see a social security card, SSA-1099 or Medicare card. For each ITIN on the return, the site requires a letter or card from the IRS. VITA sites are generally good about this. And if they’re not, it only takes a few rejects before they get compliant. Sites learn that people think they have their son’s number memorized or that the number on the W-2 must be right, but it sometimes turns out to be wrong.

“Misspelled Names. Spell all names listed on a tax return exactly as listed on that individual’s Social Security card.”
VITA tackles this issue on several fronts. First, VITA volunteers are trained to take the name from the document used to verify the SSN or ITIN. Secondly, checking on the names is part of quality review process that is required for all VITA returns. Many tax sites also require the taxpayers to review the printed return. This is a good practice that can result in finding typos that a reviewer might miss. Moms know how to spell their kids’ names. And since the vast majority of VITA returns are e-filed, we get a chance to correct misspellings during the reject process.

“Filing Status Errors. Some people claim the wrong filing status, such as Head of Household instead of Single.”
A large chunk of most VITA training addresses basic issues such as filing status, qualifying children and qualifying relatives. Both the Basic and Advanced certification tests have several filing status questions. The main VITA resource, Publication 4012, Volunteer Resource Guide, has detailed decision trees and interview guides devoted to determining the correct filing status.

“Math Mistakes. Math errors are common.”
Really? Perhaps for some, but not for VITA. Our new tax preparation software may be recalcitrant at times, but it does do arithmetic correctly. For VITA, math errors are a thing of the past; however, what we have in its place are data entry errors. In fact, recent results from the SPEC national quality team found several errors that were caused by typing in the wrong numbers. This is particularly problematic when withholding is wrong.
Quality reviewer alert: Always check the numbers – particularly amounts from 1099s and W-2s. Preparers are human and we make mistakes. Please have our backs.

“Errors in Figuring Tax Credits or Deductions. Filers can make mistakes figuring their Earned Income Tax Credit, Child and Dependent Care Credit, the standard deduction and other items.”
Fortunately, this is another topic that VITA spends lots of resources on training, testing and in Publication 4012. But it is easy to make one little wrong click and mess up a credit. So here’s another plea for preparers and reviewers alike: always look for EITC and if there isn’t any, know the reason why. It may be something simple like the income is too high, or something less obvious, like the taxpayer turned age 65. Fewer than half of VITA returns claim the EITC; but if it is missed on the original return, it may never be discovered. And that could be thousands of dollars lost by the taxpayer.

“Incorrect Bank Account Numbers. The IRS strongly urges all taxpayers who have a refund due to choose direct deposit. It’s easy and convenient.”
One of the worst errors is sending someone’s money off to the wrong bank account. And since TaxSlayer doesn’t require double entry on two different pages and no double entry on a Form 8888, Allocation of Refund, it’s really easy to get a routing or account number wrong. In addition to quality review, this is a good time to enlist the help of the taxpayer. Require all taxpayers to review the routing and account number and maybe even ask them to initial it after review just so they really pay attention.

“Forms Not Signed. An unsigned tax return is like an unsigned check – it’s not valid.”
This is really just relevant to paper returns and VITA does few of those. The most important angle is to make sure that when we do a paper return, we make sure that the taxpayer understands that we are not filing the return and that he must sign and mail the paper return. There can be real trouble when this is not made clear. This year, the problem is exacerbated by the fact that many volunteers find the TaxSlayer federal return types to be confusing. Here’s a translation:

For refund returns:
Electronic Mailed – E-file with Paper Check
Direct Deposit – E-file with Direct Deposit
Paper Return with Direct Deposit – This one is clear.
Paper Return – Paper Return with Paper Check

For balance due returns:
Mail Payment – E-file with No Direct Debit.
Direct Debit – E-file with Direct Debit.
Paper Return with Direct Debit –This one is clear.
Paper Return – Paper Return with No Direct Debit

“Electronic Filing PIN Errors.”
Most VITA sites have this well covered and the process is set up in the software, making it all pretty automatic. There is more information about this in Publication 4299, Privacy, Confidentiality, and Civil Rights – A Public Trust.

“Filing with an expired ITIN. A tax return filed with an expired Individual Tax Identification Number (ITIN) will be processed and treated as timely filed, but will be processed without any exemptions or credits claimed.”
The PATH Act requires ITINs to be periodically renewed. The renewal process is similar to the original application; that is to say, it is cumbersome and takes a long time. VITA sites who serve taxpayers with ITINs should identify Certified Acceptance Agents in their area who can help taxpayers with this process. A recent QSRA Alert from SPEC provides some detailed information on this topic.

Looks to me like VITA is in good shape regarding all of these common errors. See, you’re doing a great job. But we knew that. Keep up the good work!