Common Ways People Overpay Taxes

When the realization hits you that you overpaid your taxes, you immediately wonder if you can recover the money. Yes, you can get money refunded if you genuinely overpaid your taxes, and you’re not alone in this situation either. About 2 million taxpayers send the government roughly $1 billion every year that they could have kept.

Tax Mistakes That Result in Overpayments

A taxpayer in Cherry Hill can end up overpaying taxes for a number of reasons. You may not have entered current information on the W-4 form that your employer uses to process your pay. If you don’t claim all of your dependents, then the payroll processor will withhold more taxes than you actually owe. Even if your W-4 is up to date, a payroll processor could make a mistake and erroneously send in too much money.

Self-employed people estimate their own income taxes and send in money to the government throughout the year. They base their estimates on current and previous income. However, if a business takes an unexpectedly bad turn in the last half of the year, a self-employed person might have already overpaid.

Tax overpayments due to payroll withholding errors or self-employed tax estimate mistakes typically reveal themselves at the end of the year. You’ll realize that you paid too much in taxes and file a tax return that qualifies for a refund.

In other situations, you may not learn that you overpaid until the next year or even two or three years later. Missing deductions that you could have taken will cause you to pay more than you legally owe. You might miss a deduction by using the standard deduction instead of pursuing a mortgage interest deduction. Sometimes people fail to cite their charitable donations and do not get their tax break as a result.

Complex tax filings with missed deductions may warrant a conversation with a NJ tax lawyer. A legal analysis of your records by a New Jersey tax attorney could help you understand your position before you approach the IRS about a refund for missed deductions. An attorney can inform you about deadlines for claiming refunds of overpayments. You generally have three years to correct overpayments.

Filing Amended Tax Returns

Should you not notice a tax overpayment the year that it occurs, you likely have the option of filing an amended tax return for the year of overpayment. When you amend a tax return, you essentially send in a new and corrected return to replace the first one. As long as the IRS agrees with your tax calculations, the agency should issue a refund.

IRS Overpayment Letter

The possibility exists that the IRS might notice that you paid too much. After reviewing your tax returns, the agency might issue a Notice of Overpayment Letter to you. This letter is labeled a CP 268 notice. It only comes through the mail. You will not receive legitimate emails about tax overpayments.

The CP 268 notice will explain the tax recalculation and what you need to do to recover your funds. You may be able to simply ask for a refund. If you expect to owe taxes this year, you could have the overpayment applied to your current tax obligation.

In the event that you receive a CP 268 notice, you may not need to amend any of your tax filings. However, self-interest might demand that you make sure that you truly qualify for the refund. Mistakes can be introduced into your tax filings from many directions. The IRS can make mistakes as well as your tax preparer. A company that issued a 1099 earnings statement may discover an error and change the income that it previously reported about you.

Answers for Your Tax Law Questions

In Cherry Hill, you can consult Matthew Dopkin about your tax questions and problems. Reach our tax and estate planning law office by calling 215-519-4269 or fill out the online contact form. Ask for an appointment with a NJ tax lawyer today.