One certified public accountant in El Toro recalls the year a client kept getting notices from the Internal Revenue Service asking why he had not filed his federal tax return. After months of pleading his case by mail, the client submitted a duplicate return but refused to send a check, insisting that he had already paid. After four months, the IRS slapped him with a hefty penalty.
A year and a half later, the sheepish client found his original return--with check--in the glove compartment of his car.
In the annals of taxpayer boo-boos, this qualifies as a doozy. Far more common, tax experts say, are errors that are mundane and, often, downright embarrassing. They are also, by their nature, usually quite avoidable if taxpayers use common sense and keep their wits about them.
Among the most frequent blunders, experts say, are forgetting to sign returns, transposing Social Security numbers, failing to attach W-2 forms, miscalculating the number of exemptions, making errors in basic math, misreading the tax tables and inadvertently recording amounts on the wrong line of the form. (Best advice for that: Use a ruler to keep your place on the form.)
Some of these goofs cost taxpayers only time, but many can cost money. Each year, tens of thousands of taxpayers pay the price in frustration, aggravation, penalties or delayed refunds for fouling up their returns in minor or grandiose ways.
"Historically, every year it's the same kinds of errors," said Robert L. Giannangeli, an IRS spokesman in Los Angeles.
Last year at the Fresno tax-processing office alone, which dealt with 10.6 million federal tax returns from Southern California and Hawaii, nearly 14,000 forms came in without W-2s. About 42,000 were filed without signatures.
Half a million had names and Social Security numbers that didn't match up, particularly on returns filed by undocumented aliens. And in the weeks before the April 15 deadline, the station received 17,230 dishonored checks, a different sort of error, to be sure, but a big mistake nonetheless.
Even the simplest errors, such as forgetting to sign and date a return, can cause a delay of at least a week, Giannangeli said, because the form must be mailed back to the taxpayer, fixed up and returned. Meanwhile, penalties can stack up if procrastinating taxpayers have waited until the last minute and errors cause them to miss the filing deadline.
Hal Brand, the El Toro CPA whose client's return sat in a glove compartment, finds that some taxpayers forget to include W-2s or sign forms even if his firm attaches the documents and makes specific instructions about where to sign.
"If you don't put an arrow where the signature goes, they won't find it," he said.
Many parents, observers noted, can expect to be stung by a recent change in the tax laws requiring that filers provide Social Security numbers for all children 5 and older. If the numbers are missing, the IRS will halt processing the return and send a letter to the taxpayer explaining the requirement. To avoid delays, a filer who has applied for a number but not yet received it can note that on the form.
Taxpayers also frequently make mistakes when it comes to keeping track of deductible expenses and the 1099 forms that reflect reportable income from savings, dividends and other miscellaneous income.
"My clients tend to be the type that don't make silly mistakes," said Alan P. Melcher, an accountant with the Woodland Hills firm of Goldman, Melcher & Co., which has a number of entertainment industry clients. "(Instead,) they'll forget things because they were unaware that they had to keep detailed business-mileage logs and detailed records of meals and entertainment."
"Lots of mistakes can cost them later on," said Charles Rosenblatt, a tax partner at the Los Angeles firm of Roth Bookstein & Zaslow. "People don't keep track of Form 1099s. They fail to report the amount and then they get horrendous notices from the IRS. I see these all the time."
But taxpayers should not blindly assume that all such interest and dividend forms are correct, he noted. "You'd be surprised how many (taxpayers) receive forms from institutions they've never heard of." Occasionally, taxpayers will blithely put down what their own records show and fail to notice discrepancies with the 1099 forms. That will raise an instant red flag at the IRS, Rosenblatt said.
As would be expected, accountants say many errors can be avoided if taxpayers simply hire professionals to compute their taxes and fill out forms with the aid of a computer. But with many accountants charging $200 and up for tax preparation, that isn't always an option.
Even the best help, however, won't help the poor soul who crosses his hands when it comes to getting tax forms in the mail. "One thing we see every year," Giannangeli of the Los Angeles IRS office said, "is that people put the wrong forms in the wrong envelopes, the state in the federal and vice versa. That drives everybody crazy."