January 23rd, 2018

Having a small business can, for some people, actually be beneficial in terms of taxes. The amounts and types of deductions you can qualify for can, especially for a business in its early days that isn’t making much money yet, put you in a position where you owe very little in taxes.

And, while you work hard to make sure that all of your financial information is in order and that you’ve properly filled out your tax return forms, sometimes errors happen. When they do, the IRS will reject your tax return. You’ll be responsible for amending and resubmitting it.

Keep in mind that the vast majority of E-filed returns are rejected due to simple math errors or typing errors. Let’s take a look at some of the common reasons small business tax returns get rejected:

  1. Incorrect name. Believe it or not, one of the most common errors when it comes to tax returns for small businesses has to do with naming. Specifically, people make errors entering the names of the business owners or partners, or their spouses if it’s a sole proprietorship and the couple is filing jointly.
  2. Incorrect address. The house number, street spelling, road abbreviation, and zip code are all potential spots for error.
  3. Incorrect date of birth. Incorrectly entered date of birth information will cause your tax return to be rejected.
  4. Incorrect direct deposit information. Direct deposit generally means you’ll get a tax refund sooner, but that’s’ not necessarily the case if the IRS has the wrong bank account information.
  5. Incorrect employer/employee information entry. This might include incorrectly entering an EIN from a 1099, or it might include incorrectly entering an employee’s social security number or other information.
  6. Previous year AGI doesn’t match. You’re required to enter your previous year’s AGI when e-filing, and if it doesn’t match it will reject your return.
  7. PIN doesn’t match. This is another very common reason for rejection: the pin number associated with your business’ EIN was entered incorrectly.
  8. Dependent claims. This is of course more common with individual tax returns, but you see it quite often for businesses that are a sole proprietorship or family partnership, as well. The taxpayer’s social security number has already been claimed on a return. This may be an entry error, or it may indicate fraudulent use of your social security number by someone else.
  9. Problems with a particular form. If you’re claiming the Earned Income Tax Credit, for example, there may be a problem with the particular forms related to that credit.

As you can see, the vast majority of reasons that a tax return gets rejected have nothing to do with a mathematical error, and they don’t indicate that the IRS has somehow flagged your return or that you might be facing an audit. In most cases, it’s simply a matter of a clerical error.

How you go about fixing a rejected return depends on the particular error, and how you filed. If your return has been rejected, you can amend your form from the IRS’s e-file website. Generally speaking, your tax professional can handle this process for you and will normally do so. You are allowed to continue to e-file your tax returns as many times as it takes until the IRS accepts your return.

If you find out you’ve made a mistake but the IRS has accepted your return, you have to wait to make your changes. You can’t correct it electronically. Instead, you’ll have to fill out an amended tax return and submit it along with any new information (such as any changed schedules or forms) to the IRS.

You can file that amended tax return as many as three years after when you originally filed the return, so you have some time to fix the problem.

If your tax return is rejected by the IRS after the tax filing deadline, you have a grace period. You have another 5 business days to efile your corrected tax return. If you’re going to instead print it and mail it to the IRS, you have an additional 10 days.