5 Common Mistakes to Avoid on Your Tax Return
Much like budding trees (and pollen!) and the first day of baseball season, tax season is part of our spring ritual. As you get ready to file your taxes, take a look at your returns and make sure you don’t get tripped up by one of these common tax filing mistakes.
Missing or Incorrect ID
People sometimes get so focused on the numbers that they forget to sign their returns or enter other necessary information, such as their Social Security number. Or the boxes may be filled in, but with errors. Problems with names often occur after marriage or divorce, particularly if you’ve changed your name but haven’t notified the Social Security Administration (SSA).
For the IRS to process a return properly, identifying information has to match the agency’s records exactly, and everyone filing either singly or jointly must sign the document. It can end up being a little complicated if you’ve changed your name, or need to make corrections to your information. The IRS provides helpful information on what to do if you have name changes and social security number matching issues.
All those numbers to compute and enter on tax forms provide fertile ground for simple math mistakes.
Usually, when the IRS questions an item on a tax return, they have procedures to notify the taxpayer, allowing them to provide an explanation and documentation. With math errors, however, the IRS has the authority to bypass such procedures and recalculate the figures, which may or may not be to your advantage. This National Taxpayer Advocate (NTA) blog tells you what you need to know about these math error notices.
Such mistakes frequently turn up in areas such as taxes owed, credits for children and first-time homebuyers, deductions and number of exemptions, so double-check your arithmetic before filing. If you’re not feeling confident, especially with changes in the tax code, it’s wise to consult with a tax preparation professional.
Need a hand in getting your financial life under control?We can help!
Don’t forget to account for all your income, including those from sources other than a regular job. Your side hustle on Etsy or rental income on your Air B&B? It counts. So does interest, dividends paid out on investments. Not reporting, or underreporting this income can wind up with you being hit by an Accuracy-Related penalty by the IRS.
For this reason, it’s important to keep excellent records and carefully total all income statements such as W-2s, 1099s, K-1s and 1098s to make sure what you report is accurate and the taxes you pay are adequate. Remember, the IRS gets copies of all those forms, too.
Wrong Filing Status
Single? Married filing jointly? Married filing separately? Head of household? Which to choose?
The most obvious filing status isn’t always the most beneficial for you, or even correct. Sometimes couples who file a joint return lose eligibility for valuable tax credits and deductions they could have claimed by filing separately. By the same token, single parents with eligible dependents might lose out by not choosing head-of-household status. Parents with dependent children who work need to make sure everyone is on the same page at tax time. A child can’t claim single status if she’s being claimed as a dependent on the parent’s taxes.
Choosing the right one is important as selecting the wrong one can impact your tax liability. The IRS again provides helpful information to help you determine your filing status. And if you remain unsure, your best bet is to contact a tax preparation professional.
Filing Late, or Never
Many taxpayers get overwhelmed and put off filing their tax returns until after the deadline or don’t submit them at all. Eventually, the IRS will notice and come after interest and penalties on anything you owe. Those who are unable to make deadlines can get an automatic six-month extension and avoid these costs just by asking and delivering any taxes due by the filing deadline.
Note that this is an extension of your filing deadline, not your payment deadline. You must make an accurate estimate of your tax and send any necessary payment with your Form 4868 or pay the tax due electronically. If you find you cannot pay the full amount due with Form 4868, you can still get the extension. You will owe interest on the unpaid amount.
A little extra time and attention go a long way toward completing accurate tax returns. By following these tips, you can assure you won’t get an unexpected letter from Uncle Sam after April’s tax deadline.