Stimulus Update: Don't Let This Simple Mistake Hold Up Your Tax Refund

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  • The majority of letters coming from the IRS appear to reference math mistakes.
  • You have 60 days to appeal a math error letter.

It is particularly important to double check the math on your tax return this year.

Approximately 33% of Americans wait until the last minute to file taxes. If you're one of those late-filers, you might actually be in luck. Filing late this year gives you the opportunity to learn from other people's mistakes.

The biggest problem this year appears to be simple math errors, including issues involving claims filed for additional Child Tax Credit money, Recovery Rebate Credit, and the Earned Income Tax Credit.

Get this: Between Jan. 1 and July 15, 2021, the IRS sent out somewhere in the vicinity of 7.4 million math error notices for stimulus payment mistakes alone. Of the 11 million notices sent regarding math errors, more than 67% of them were due to pandemic-related stimulus issues. We're not sure how many letters will be sent this tax year.

What you can do

The thing about waiting until the last minute to file your taxes is that you may feel rushed. Don't let a ticking clock prevent you from double-checking your math.

If double-checking your math is not your idea of a good time, congratulations, you're normal. One thing that can help is online tax software. Even if you pride yourself on doing your own taxes, online software is great at catching math errors. Think of it as your tax editor, catching any mistakes that may slip your notice.

You could also hire a tax preparer, but they're swamped this time of year and it may be tough to find somebody this late in the game. If you don't want to hire a tax preparer or can't find one, we advise that you:

  • Check and double check your math, or
  • Use online tax software

Wonder how 67% of the math error notices sent by the IRS last year were stimulus-related?

According to Fortune, if you receive a letter from the IRS this year, it may be because your gross adjusted income (AGI) exceeded these amounts in 2021: $75,000 if you're a single filer, $150,000 if you're married filing jointly, or $112,500 if you file as head of household.

Any stimulus funds paid out in 2021 were based on the last tax return you filed (presumably, 2020). If your income increased in 2021, you may be asked to return some or all of the stimulus funds deposited in your bank account.

It's not so much a math issue as a 2021 was better than 2020 issue. But still, the IRS will view it as a math error. You did nothing wrong, but could still owe money.

At the heart of other math error letters is the Recovery Rebate Credit. As a quick reminder: The Recovery Rebate Credit was a refundable tax credit that anyone who did not receive their third stimulus check could request while filing 2021 taxes. A filer may have received a math error letter if they earned too much to qualify for the stimulus payment.

Old-fashioned addition and subtraction

Of course, a letter from the IRS telling you that there's been a math mistake made may have nothing to do with stimulus payments, Child Tax Credit, or any other pandemic-related issue. It could be that something was added or subtracted incorrectly. It happens.

Read more:3 Ways to Make the Most of Your Tax Refund, According to an Expert

If the IRS gets it wrong

You may receive a letter and realize the IRS got it wrong. Your math is right and there was an error on their side. The IRS encourages people to call them to review their return with a representative at (800) 829-8374.

While that sounds great, it's not as easy as one might imagine. The odds of speaking with a live representative on your first try are low due to understaffing and a backlog of tax returns. Keep trying, though. Whether your letter says so or not (some letters omitted this bit of information), you have 60 days to appeal a math error letter. It's up to you to provide additional information to show the IRS that you're right and that it needs to reverse the initial finding. If you don't contact them in that 60 days, you lose all rights to appeal or to reverse the charges.

The moral of this story is to address the issue once a letter is received. Despite the urban legends we hear about the IRS, the agency is actually quite willing to work with you to get things right. If you made a mistake, chances are, it's not a big deal. It may take a call or two to get it sorted out, but once you've cleared the matter up you can move on to more important things.

Read more:4 Ways to Save Money on Your 2021 Taxes

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