“I’ve never had this many rejects before,” said owner Charissa Rand, thumbing through her filing cabinet of tax returns. “And these don’t include the ones we’ve resolved.”
The IRS has increased issuance of IP PINs, or Identity Protection Personal Identification Numbers, which is a six-digit code that prevents someone else from filing your tax return using your social security number. These are usually issued if the IRS has reason to believe a person’s identity has been stolen.
“Many clients don’t realize that they even have an IP PIN,” Rand said.
Another reason returns are rejecting at such a high rate is due to problems with forms 1095-A, Rand said, which is a form taxpayers receive when they buy their health insurance through the marketplace.
Credit: Bryant Billing
Credit: Bryant Billing
“I go on healthcare.gov, I put in my information. I put in how much money I make, and then it gives me a dollar amount of what I have to pay,” she said. “So maybe I’m only sending $200 a month to healthcare.gov. (The) premiums are actually $400 a month, but the government’s going to step in pay $200 of that.”
The problems arise when people, intentionally or unintentionally, misreport their income on Healthcare.gov, Rand said. When the IRS finds out that someone is reporting their income as lower than what they actually earned, that person has to pay back the portion the government covered to the IRS — sometimes to the tune of a few thousand dollars.
People underreporting their income isn’t always intentional or fraudulent, Rand said. Sometimes it’s a matter of not considering other forms of income a person may be receiving.
“They don’t consider overtime, or they’re guessing,” she said. “They don’t consider the DoorDash job that they got. They don’t consider they got paid $5,000 for babysitting, or they cashed out their retirement.”
If your tax return gets rejected, your tax return is not considered “filed” by the IRS, and may be subject to penalty, Rand said. The best course of action is to immediately figure out why it was rejected, and fix it.
For individuals, it’s worth considering filing an extension, to make sure you’re getting all the credits and deductions you’re due, said Lance Bradstreet, partner at Bradstreet and Company. However, be warned an extension of time to file doesn’t mean an extension of time to pay.
“It can be an exercise of guessing at what you might owe, getting something paid, and then getting more time to file,” he said. “And if you overpaid, they will refund it or credit it to next year. If you underpaid or you didn’t pay it on the extension, then you can be subject to penalties and interest.”
One little-known resource is that individuals can also create an IRS online account, which gives taxpayers access to prior year returns, wage and income transcripts, copies of IRS communications, and whether you have a balance due.
“That’s a great resource that a lot of people aren’t using,” Rand said. “It’s been there for a couple of years, but not to the extent that it’s there now.”
On the business side, Bradstreet said, a few tax items are set to be “sunset” at the end of this year.
For example, the ability to take Section 168 bonus depreciation (essentially accelerating the depreciation on business assets) has gradually ramped down from 100% to 60%, and 40%.
The bulk of these changes, enacted during the first Trump administration, would need to be renewed by Congress by the end of the year, or “we all wake up on January 1, 2026 with the tax laws having reverted back to what the tax laws were in the Obama era,” Bradstreet said.
Additionally, changes in recent years have affected research and development tax credits, potentially impacting businesses that work with Wright-Patterson Air Force Base, Bradstreet said. Right now, research and development tax credits are still available, but businesses must amortize their expenses, rather than deducting them in the year they were incurred, he said.
“That has been a pretty seismic shift in this area, and all our DoD people and technology people ... it does kind of make them rethink how they spend their dollars,” Bradstreet said.
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