March 25, 1998
Avoid Common Tax Return Errors
WASHINGTON - The number most
likely to be wrong on a tax return isn't an income or deduction amount, according to the
Internal Revenue Service -- it's the identification number for the taxpayer, spouse, or
dependent. This was the most frequent error last year and the second most common mistake
in returns received by the IRS through February 1998.
Most Americans use a Social Security number (SSN) as their
identifying number for tax purposes. Persons not qualifying for an SSN should file Form
W-7 to obtain an IRS-issued Individual Taxpayer Identification Number (ITIN). Parents who
have a child living with them pending legal adoption may need to file Form W-7A with the
IRS to request an Adoption Taxpayer Identification Number (ATIN).
In addition to their own SSN, taxpayers must list the numbers
for their spouse and dependents, qualifying children for the Earned Income Tax Credit
(EITC), and both the child care provider and qualifying children for the Child Care
Credit. Listing the child's name and number on the Child Care Credit form is new this
In more than 2.5 million instances last year, the required
number either was missing or did not match IRS or Social Security records for the name
used. The IRS then removed the credit or exemption claimed, resulting in a smaller refund
or a tax bill.
The EITC was the second most frequent error subject in 1997
and has been in the top spot this year. In addition to errors in the credit amount, some
taxpayers claim it even though they do not qualify, either because of income or age.
A taxpayer with one qualifying child must have 1997 income
under $25,760 to claim the EITC. With two or more children, the limit is $29,290. The
limit includes such nontaxable earned income as housing allowances and contributions to a
401 (k) plan. Some EITC claimants overlook these amounts, which are in box 13 of Form W-2.
Those without a child may claim the EITC if their 1997 income
was less than $9,770, but they must be at least age 25 and less than 65. Failure to
observe this age limitation was the most frequent error on last year's Form 1040EZ.
More than 150 local IRS off ices will observe EITC Awareness
Day this Saturday from 9:00 a.m. to 3:00 p.m., offering tax return help to potential
Two errors follow identification numbers and the EITC in
frequency. Together they totaled more than 950,000 last year. The first is figuring the
refund or balance due amount, which involves subtracting the tax paid from the total tax
liability. The other is getting the correct tax from the tax table. Table users follow the
line for their taxable income to the tax column for their filing status.
The IRS cautions that the tax table's income ranges are
labeled "at least" one amount "but less than" a second amount,
generally a $50 increment. Some taxpayers with taxable incomes falling exactly at a $50
multiple mistakenly use the line for "less than" the amount, rather than the one
for "at least" that amount.
One way to significantly reduce the possibility of error is to
use an IRS e-file option. Fewer than one percent of electronic returns have errors of any
kind. As of March 20, the IRS had received nearly 19.8 million e-filed returns, exceeding
the 19.2 million received during all of last year. Nearly 15 million returns came via
computer, including over 600,000 from home computer users. The other 4.8 million arrived
through TeleFile, the IRS's file-by-phone system.
1998 FILING SEASON STATISTICS
Cumulative through the week ending 3/21/97 and 3/20/98
1997 1998 % Change
Individual Income Tax Returns (electronic and paper)
Total Receipts 55,703,000 56,120,000 0.7
Total Processed 44,841,000 47,517,000 6.0
E-filing --Total Receipts:
Standard E-file 12,108,000 14,964,000 23.6
TeleFile 3,809,000 4,786,000 25.6
Refunds Certified by the Martinsburg Computing Center:
Number 40,948,000 43,218,000 5.5
Amount $55.106 bil. $60.363 bil. 9.5
Average Refund $1346 $1397 3.8
Direct Deposit Refunds:
Number 12,626,000 14,562,000 15.3
Amount $23.172 bil. $27.210 bil. 17.4
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