Filing taxes can be stressful and confusing. This year specifically seems to be throwing people for a loop.
Many taxpayers who have been counting on large tax refunds are getting whacked with staggering tax bills. While it may be tempting to rush to try and complete the onerous task of filing taxes as quickly as possible, take the extra time to try and avoid these 11 common tax filing mistakes. Falling for just one of them could cost you a bundle, or worse, increase your odds of an Internal Revenue Service (IRS) audit.
Here is a list of 11 common tax filing mistakes that you should work to avoid.
1. Wrong Social Security Number
Would you believe the IRS receives thousands of tax returns with either the wrong Social Security number or no Social Security number attached? Surprisingly, this is one of the most common tax errors. You should have your own number memorized, but errors can also occur with your spouse’s or dependents’ numbers.
2. Failing to Include Every Last Cent of Income
If you received tax forms from employers, the IRS should also be receiving a copy of those forms as well. Be sure to include all your W-2 forms as well as 1099 forms from bank accounts or investments accounts. Leaving income off your tax return is a great way to make the IRS think that you are trying to hide income. Doing so may cause them to take a closer look at areas of your tax return, or even ask for a full-blown audit.
3. Making Math Mistakes
Using a tax professional or tax software should help eliminate many math mistakes when filing your taxes. All the same, many taxpayers still file their returns manually. Check your math.
Even a small error could leave you vulnerable to IRS penalties. On the flip side, if you make a math mistake and overstate your income or understate deductions, you could end up overpaying on your taxes. Double and triple check your math or use a tax filing software. It is relatively cheap and should help you avoid mistakes and, in my opinion, reduce tax filing stress.
4. Ignoring Your Eligible Credits and Deductions
Claiming too many or too few credits and deductions is one of the biggest mistakes a taxpayer can make. Every year, many taxpayers attempt to claim tax credits or rebates that they are not actually eligible to take. That being said, do not be afraid to capitalize on all of the tax deductions and credits that you qualify to use.
5. Not Signing and Dating Your Return
You put in the time to track every single cent of tax deductions. You then agonize over filling in every line of your tax returns. Then when all is said and done, you send your tax return to the IRS, but forget to sign and date it.
You may say, “What is the big deal?” The big deal is that the IRS will not accept tax returns that have not been signed and dated. Without a signature and date, it will be considered as not having been filed at all. Once you realize your mistake, your return may be considered late, and this could mean you are stuck paying IRS penalties and interest.
6. Not Filing Your Taxes
If you want to file your taxes late, you must request an extension in advance. We all get busy, and taxes are the last thing we want to deal with. But, failing to file for an extension will often result in additional costs once you are ready to file. Keep in mind, filing an extension does not exempt you from having to pay any taxes owed by April 15th. It just gives you more time to pull together all of your tax information and actually file.
7. Forgetting to Include Your Payment Information
Keep track of your payments. Last year, I made a payment to my state tax authority that was not credited properly. Luckily, in this case, I paid online with a credit card so I have an emailed receipt as well as the credit card statement as proof of payment. The more common scenario is simply forgetting to send payment all together.
If you are sending a check or money order with your tax return, make sure it actually gets sent. Also, include your name and Social Security number on the check, as well as to which tax bill the payment should be applied. When you e-file, you can make payments electronically. Doing so avoids leaving it to the mercy of the mail carrier. Make sure you enter the correct bank information so the payments will actually clear.
8. Choosing the Wrong Filing Status
Which tax filing status should you use? Are you head of household, single, married but filing separately or married and filing jointly? Choosing the correct status can be confusing. Picking the wrong one will throw off all of your tax numbers. Do not get sneaky by trying to use a status, for which you are unqualified, in order to lower your taxes.
9. Check Direct Deposit Information
Why wait for a tax refund check from the IRS when it can be direct deposited into your bank account? Take time to make sure you are correctly entering your bank’s routing number and your account number. Typos could send your refund elsewhere and could lead to a headache.
10. Missing IRS Deadlines
The tax filing deadline is April 15, 2019. If you are unable to get your information together, file an extension. Similarly, if you own a business, corporate taxes are due by March 15th. If you are looking to make a retirement plan contribution either to an IRA or Roth IRA, it must be made by April 15, 2019 for the 2018 tax year. If you are looking at a 401(k) Profit Sharing, Cash Balance Pension Plan, or SEP IRA, you have until you file your taxes. Additionally, you still have time to open a SEP IRA, but the 401(k) or Pension must have been set up before year-end 2018.
Know the tax deadlines. Missing them will mean penalties and interest, which is a waste of money in most cases.
11. Leaving Yourself Vulnerable to Tax Fraud
Tax refunds and scams are on the rise. Beyond the aforementioned 11 tax mistakes, take a little extra caution and look for ways to reduce your risk of being a victim of a tax scam. One of the best tips is filing your taxes early. That will help you avoid giving scammers a chance to run off with your tax refund.
Taxes are hard enough. Dodge these common mistakes to avoid having to rehash them down the road. A few extra minutes today could save you hours, and potentially thousands of dollars, in the future.
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