10 Tax Mistakes You Must Avoid!
Tax laws are complicated, but the most common tax return errors are surprisingly - simple things that I want to help you avoid.
In this blog post, I’ll cover the top 10 common tax filing mistakes according to the IRS. That can cost YOU, the taxpayer, valuable time and precious money.
Stay until the end for my #1 personal mistake to avoid making
Hi I’m Noel Lorenzana, Registered CPA.
I just want to say that using a reputable tax professional like a CPA, enrolled agent, or other knowledgeable tax preparer can help you avoid these errors.
#1 Filing Too Early
Listen up, folks! Filing taxes late is a big no-no, but you know what else is just as bad? Filing prematurely. Meaning, not having all of your tax documents before you file your taxes. This will lead to delays.
You don’t want you to file your tax return only to find out later that additional tax documents came in the mail. In this case, you’ll need to amend your tax return, and if you hire someone to do your taxes, expect to pay an additional processing fee.
Just double check everything to ensure that you have all of the tax documents you expect to receive. If you’re not sure, then call the company that you’re iffy about, to see if they have a tax document for you..
#2 Missing or Inaccurate Social Security Numbers
Your social security number is only nine digits, but there's a lot more opportunities to make a mistake. Make sure your Social Security number on your tax return matches the one on your card to the tee. And, be sure to, double check that the right number has been given to your employer and financial institutions. Trust me, this little step can save you a whole lot of hassle later on.
#3 Misspelled Names
Have you ever seen old 'The Andy Griffith Show' where the newspapers would always misspell Barney Fife’s last name? Well, the same thing can happen on your tax return, but instead of just getting upset about it, now the IRS has to figure it out. And you know what that means? More IRS letters, delays and headaches.
So, here's a simple tip: make sure the names of all taxpayers and dependents on your tax return match the names on their Social Security cards. If you recently changed your name, make sure your name on the tax return, matches up with the new records that the social security administration has on file.
#4 Inaccurate Information
It's all about accurate numbers, folks! Your wages, dividends, bank interest, and other income, including those side gigs. They all need to add up correctly to calculate your taxes, credits, and deductions.
Double check the figures that you entered on your tax return. One transposition or missed digit can throw off your tax return by thousands of dollars.
#5 Incorrect Filing Status
Would you believe that more often than not, people select the wrong tax filing status. If you’re single with no kids, then your filing status is Single. If your single with kids, your probably Head of Household. If your married filing together, then your filing status is Married Filing Jointly.
You would be surprised how many married people try to get away with filing single. If you’re married and don’t want to file jointly, then you generally have to file married filing separately.
Do note that some married taxpayers can file as Head of Household if they meet the IRS definition of “considered unmarried” and it applies to them.
#6 Math Mistakes
With a calculator in everyone’s pocket nowadays in the way of smart phones. Surprisingly, math errors are some of the most common mistakes. You should always double check your math, or better yet use tax preparation software, which does all of the math for you.
#7 Figuring Credits or Deductions
If you're feeling unsure about how to calculate your tax credits, you're not alone. Mistakes can happen when figuring out things like…
The Earned Income Credit, Child and Dependent Care Credit, or Child Tax Credit.
But don't worry, help is available!
The IRS on their website has an Interactive Tax Assistant, which can help you determine if you're eligible for these tax credits or deductions. And, if you're using tax software, it should do all the calculations for you and include all the necessary forms and schedules, as long as you enter your information properly. Just make sure to double check everything before hitting submit on your final return.
#8 Incorrect Bank Account Numbers
If you're due a refund, listen up. The fastest way to get your money is by choosing direct deposit. But, it's important to make sure you use the correct routing and account numbers on your tax return. Be sure to double check those numbers before you approve your tax return.
If your return is submitted and you later realize that you’ve made a mistake with the routing or account number. Then you’ll need to call the IRS, and try to get the direct deposit information corrected.
Getting through to the IRS can be difficult. If you need a shortcut getting through to the IRS, check out my video up here.
#9 Unsigned Forms
If you’re paper filing a return. Did you know that an unsigned tax return is not valid? If you're filing a joint return with your spouse, it's important to make sure that both of you sign the tax return.
If you want to avoid this common mistake. Consider filing your return electronically and digitally signing it before sending it off to the IRS.
So avoid any unnecessary delays by properly signing your tax return.
#10 Not Reporting All Taxable Income
This is a big one. Not reporting all of your taxable income is a mistake that can have serious consequences.
Taxable income includes not only your salary and wages but also any other sources of income such as tips, freelance work, investment income, and even bartering or exchanging goods or services.
The IRS, not surprisingly, has access to a lot of information, including wage information from your employers, access to all the 1099s your receive, and can therefore detect unreported income. If the IRS finds that you have underreported your income, you’ll get a nasty letter, along with owing penalties and interest.
It’s important to report all sources of taxable income, no matter how small. That is, if you want to avoid mistakes and potential trouble.
If you have any questions or concerns about what qualifies as taxable income, you should consult with a tax professional.
Thanks for reading, and see you in the next blog post!
