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 Solving Common Tax-Preparation Problems

Discrepancies between Your Records and Informational Returns


When the IRS processes your return, one of the things the processors will do is verify that any informational returns they’ve received match up with your return. They will compare the W-2 information provided by your employer (or employers) with what you enter on the “Wages, Salaries, Tips, etc.” and they will compare the 1099-INT and 1099-OID statements provided by almost anyone who has paid you interest with what you enter on your 1040 or Schedule B. (Schedule B summarizes your dividend and interest income when you have more substantial amounts of either.)
Any difference between what one of these informational returns shows and what you enter on a line of a tax schedule of your income tax return will almost certainly trigger a review of your return. In this case, the IRS will write you a letter asking for an explanation of the discrepancy. You’ll then need to review your to determine whether your return’s number was the correct one or—and this is probably more likely—the informational return’s number was the correct one. Then you’ll need to fix the mistake.


This sequence of events points out a potential trouble spot. You can use Quicken to collect your taxable income and, in some cases, your tax-deductible expense information. But it may just be that there’s another, more accurate of the taxable income or tax-deductible expense numbers you need to enter on your tax return. When this is the case, it makes the most sense to use this other source for preparing your tax return. And even if you do record the information provided by this other source into Quicken, you may make an error entering the data.


For this reason, it’s easiest and most accurate to get your salaries and wages information from employer-provided W-2s and to get interest and dividend information from the 1099 informational returns your broker or bank prepares.

Timing Differences

Another opportunity for error concerns timing differences. You may be required to report some item of income or deduct some expense in one year, although you did not record the information into a Quicken register until a subsequent year. For example, if you’re in a business, you may be required to include in your taxable income a share of partnership profits earned in one year but paid in the following year. Or if you’ve invested in a long-term certificate of deposit (CD), you may be required to report any accrued interest for the year as income. (The CD issuer may send you a 1099-OID statement of your interest earnings.)


To use Quicken to keep records of taxable income and tax-deductible expenses like this, you need to use a transaction date that places the transaction in the year that the transaction affects taxable or tax-deductible expenses, which won’t necessarily be the same year you make a deposit or write a check.