To err may be human, but making mistakes when you file your tax return can be a real drag. And we’re not just talking about delays, though that’s certainly in the cards as well.
Errors on your return can mean getting a smaller refund, getting hit with a bigger tax bill, incurring interest and/or potential penalties, or even an audit letter from the IRS.
Here are 10 tax-filing mistakes you need to avoid that will help you stop throwing your money away.
Bad bank account info
If you’re owed a refund, the IRS wants taxpayers to use direct deposit because it’s the fastest way to process your refund and get your money back to you.
But you better make sure you’ve got the right account and routing numbers on your return. If your information is wrong, it’s going to create delays and cause your bank to reject the deposit.
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Claiming too many dependents
Claiming qualified dependents on your W-4 form is a good way to get a break on your taxes. Claiming too many means not enough taxes will be withheld during the year, and you’ll end up owing the federal government money.
The IRS has guidelines for who qualifies as a dependent online. Spoiler alert: Your pet does not qualify as a dependent.
Doing your own taxes
Unless you really know what you’re doing, handling your own taxes isn’t a good idea. For starters, you run a significant risk of introducing errors in your return.
You also aren’t going to be aware of as many of the tax deductions, exemptions, and credits as a professional accountant or tax software.
Failing to file by the deadline
The deadline for filing your tax return, or requesting an extension, is April 18. This might seem glaringly obvious and impossible to miss, but life gets plenty busy, and people botch deadlines all the time.
If you file late, you’ll face a penalty: 5% of what you owe for each month or partial month that your return is late.
The penalty percentage caps out at 25%, but the IRS also charges interest — on taxes owed and on penalties — so this is something you’re really going to want to avoid.
The early bird catches the worm, or, in this case, dodges the penalty.
Filing a paper return
Nobody likes to be told to get with the times, but filing a paper return invites opportunities for issues like getting lost in the mail. Even the IRS wants taxpayers to file digitally.
The advantages of filing electronically versus paper are simply too numerous to ignore. The best tax software does the math for you, flags common errors, and will prompt you for missing information, among other things.
Forgetting to sign your tax return
The IRS will not accept an unsigned return. If you didn’t sign your return, it isn’t valid. Full stop.
And if you’re filing jointly as a married couple, both spouses need to sign. If you paid someone to prepare your taxes, they’ve got to sign and provide their Preparer Tax Identification Number.
This can be mitigated by filing electronically and signing digitally since the software will prompt you.
Making a math mistake on your tax return is pretty common, with errors ranging from simple arithmetic to more complex calculations according to the IRS.
Last year, the agency issued more than 9 million math error notices. Most of those were due to errors made in dealing with the recovery rebate credit and the child tax credit.
If you’re doing your own taxes, double- or triple-check your math. Or hire a professional.
Mucking up the basics
If you manage to misspell your name or err on your Social Security number, the IRS won’t accept your tax return. If you don’t have a Social Security number, use your Individual Tax Identification Number instead.
If you’re filing a paper return — which, again, you shouldn’t — make sure you address it to the right processing center.
And don’t be cheap with the stamps. Use too few, and the U.S. Postal Service will send it back. That can make your return late, incurring you interest and penalties.
Not reporting all your income
You have to report all of your income for the year to the IRS, including any legitimate side hustles. It doesn’t matter if it’s in a W-2, a W-9, or under the table.
Don’t try to pull one over on the IRS. The agency will find out if you failed to report any income, and it will cause major problems, from interest charges and late-filing penalties all the way up to an audit.
Overlooking deductions and credits
People too often overlook tax deductions and credits that can save them money. While most taxpayers use the standard deduction, itemizing can knock your taxable income down even further, if you have enough to deduct.
Oft-overlooked deductions include small charitable donations, dental and medical expenses, gambling losses, state sales taxes, and student loan interest.
As for credits, there are many you may qualify for. These include the child and dependent care credit, the American Opportunity credit, and the Lifetime Learning credit, among others.
Unless you’re an accountant, filling out and filing tax returns probably isn’t your idea of fun. But you should pay enough attention to avoid making mistakes so you can make the most of your refund.
When you consider the financial repercussions, it literally pays to make sure your tax return is error-free.
And remember: The deadline to file a return or request an extension is April 18.
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