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What to do if your e-filed tax return is rejected by the IRS

With nearly 70% of individual tax returns now being filed electronically, many of us take the filing method as a matter of course. And in most instances it is. However, when an e-filed tax return is rejected filing can become more complicated and more important.

Common causes for rejected tax returns

Simple filing errors. When an e-filed tax return is rejected the IRS e-filing system sends back reject codes. These codes are specific to lines on the tax return and descriptions of the problem are readily available. Most of these errors can easily be corrected. Perhaps the rejection is caused by a misspelling, a typo on a social security number, or a missing form.

Dependent Errors. This common error occurs when someone else has already claimed a dependent on a previously filed tax return. This often occurs with divorced and unmarried couples each claiming a child on their tax return. The IRS does not take sides in this situation, they simply take the earlier filed return and reject any subsequent returns.

MeF Errors. The IRS has a dynamic e-filing system called “Modernized E-Filing” that replaces the traditional “batch” based e-filing system.

Identity Fraud. Someone else has already filed a tax return using your social security number.

What to do?

Most errors are simple, are easily corrected, and your tax return is resubmitted for filing without much additional delay. However there are two instances that require your immediate attention. When either of these occur, you will need to file your tax return via the mail and work to correct the error for future tax filings.

  1. Dependent Errors. A dependent can only be claimed on one tax return. If a dependent is already claimed on another individual’s tax return you will need to provide proof that the dependent belongs on your return. This substantiation will need to be submitted with a paper filed return. In the meantime, you should contact the other party who claimed your dependent and ask them to amend their return. Let the other party know that you’re filing your tax return correctly claiming the dependent. Your filing will target both of your returns for an IRS audit. This audit risk often is enough motivation to correct the problem.
  2. Identity Fraud. The incidence of identity fraud is going up dramatically. Thieves are stealing names, addresses, and social security numbers (often from healthcare providers and health insurance records). Then the criminals are submitting tax returns electronically using tax software from places as innocent as a local coffee ship with wi-fi access. Fraudulently claimed refunds are then automatically deposited into their bank accounts. By the time anyone finds out, the accounts are closed and your withholdings are stolen. If this happens to you:

⇒ File a paper tax return.

⇒ Include form 14039: Identity Theft Affidavit with your tax return.

⇒ Attach copies of your Social Security card, drivers license, and/or passport with your tax return.

⇒ Consider mailing your tax return using Certified Mail with Return Receipt Requested so you are certain of timely delivery.

⇒ Immediately take steps to protect your financial information. The following link will take you to the Federal Trade Commission’s identity theft area for recommended steps to protect yourself.

FTC Identity Theft Assistance

While solving the cause for a rejected e-filed tax return can be a headache, the sooner the problem is addressed the sooner your refund can be received.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.