Sam Brotman, JD, LLM, MBA June 15, 2020 11 min read

Common Tax Filing Mistakes And How To Avoid Them

It is time once again for that annual rite of passage for every taxpayer: getting the tax return and payment to the IRS on time.

If you have already filed and paid your taxes, you are to be congratulated. Hopefully, you have not made mistakes or, if you have, then your early filing may give you a cushion for correcting them before the tax deadline.

If you are waiting until the last minute, you may be setting yourself up for problems created by rushing or failing to file for a tax extension on time.

Here are ten common tax filing mistakes and how to avoid them.

Mistake No. 1: Miscalculations in Math

Explanation:

You make a mistake in arithmetic or a transcription error when moving figures from one schedule or form to another.

Impact on Your Taxes:

You receive an immediate correction notice from the IRS because the math is the first thing the IRS checks. Errors can:

  • Reduce your tax refund
  • Result in a higher tax bill

Either way, you have less money in the bank when it is all over.

How to Avoid the Problem:

  • Use a tax software program that automatically calculates everything for you. You still need to ensure the initial numbers entered are correct, however.
  • Use a tax professional to prepare your return.
  • Keep a copy of your return for at least seven years.

Mistake No. 2: Errors in Deductions or Credits

Explanation:

You do not itemize when you should, or you make mistakes in entries such as:

  • Taxable income
  • Withholding
  • Estimated tax payment

You do not take deductions or credits when they are allowed, or you take them when you are ineligible for them.

Impact on Your Taxes:

You receive a correction notice. Your refund is reduced or you owe more taxes. If you do not correct the return and payment by the tax deadline, you may owe penalties and interest.

How to Avoid the Problem:

  • Many tax software applications prompt you for deductions and credits as well as help you check for eligibility.
  • Use the most up to date tax tables and forms.

Mistake No. 3: Name Errors

Explanation:

Names must match the Social Security identification number on record with the government. Issues typically occur with new spouses although it occurs for anyone who had a name change and did not notify the Social Security Administration.

Impact on Your Taxes:

Your return is not processed.

How to Avoid the Problem:

  • If your name is different from the one on the Social Security card, use the name on the card. Then get your name corrected with the Social Security Administration as soon as possible.
  • If you get married and change your name, notify the SSA as soon as possible after the wedding.
  • Have the tax application auto-populate the new return from last year’s information. (Make sure it is still correct.)

Mistake No. 4: Incorrect Account and Routing Numbers

Explanation:

The option to have your refund directly deposited into multiple accounts increases your chances of entering routing and account number incorrectly.

Impact on Your Taxes:

You could lose your refund to someone else’s account, or it could be returned to the IRS. There is no procedure to replace lost electronically transferred funds.

How to Avoid the Problem:

  • Double-check account and routing numbers as you enter them, even if there is only one.
  • Make sure any auto-populated numbers are still correct.

Mistake No. 5: Failing to Report Additional Income

Explanation:

If you have any non-W-2 earnings, you should obtain a Form:

  • 1099-MISC for paid work performed
  • 1099-INT or 1099-DIV for bank and investment accounts

The IRS receives this information automatically and checks it against your return.

Impact on Your Taxes:

Your refund could be artificially high, or your return may show you owe less in taxes than you actually do.

How to Avoid the Problem:

  • Keep track of any additional earnings that do not have taxes withheld automatically.
  • Keep all Forms 1099 you receive for tax preparation.

Mistake No. 6: Filing Under the Wrong Status

Explanation:

There are five options for filing status:

  • Single
  • Married filing jointly
  • Married filing separately
  • Head of household
  • Qualifying widow(er) with dependent child

You may select only one.

Impact on Your Taxes:

Your refund is reduced, or you owe more taxes.

How to Avoid the Problem:

  • Make sure you understand each filing status.
  • Use a tax software application, which only lets you pick one.

Some software applications will show you which ones you are eligible for and the difference in your refund or payment for each status.

Mistake No. 7: Incorrect or Missing Social Security Number

Explanation:

Since the IRS stopped including Social Security numbers on tax packages due to privacy concerns, some taxpayers forget to fill it in. Your SSN is critical to many transactions including income statements, deductions, and credits.

Impact on Your Taxes:

Return processing may be slowed, or your return may not be processed at all.

How to Avoid the Problem:

  • Make sure all required entries are present before you file.
  • Check all Social Security numbers against the card, especially for spouses and children.

Mistake No. 8: Improper Deduction of Charitable Contributions

Explanation:

Many types of donations, cash and other, could be valuable tax deductions but taxpayers may not claim them. Alternatively, charitable donations are miscalculated; non-cash donations can only be claimed at fair market value and must be in good or better condition.

Impact on Your Taxes:

You reduce your refund or owe more taxes. If you miscalculate and do not get it corrected before the tax deadline, you may be penalized and charged interest.

How to Avoid the Problem:

  • Carefully calculate and include all your charitable donations when filing.
  • Follow all donation tax rules like only donating to a qualified, tax-exempt organization.

Mistake No. 9: Missing Required Signature

Explanation:

In a rush to mail or e-file, many taxpayers forget to sign their returns. Those filing under the status Married Filing Jointly may forget to have both spouses sign.

Impact on Your Taxes:

A return missing a signature is considered invalid, so it is like you never filed. You could face penalties for not filing or not paying.

How to Avoid the Problem:

  • Tax return software sometimes auto-fills signatures; make sure they are correct.
  • Always check the return for completeness and accuracy before mailing or e-filing.

Mistake No. 10: Missing the Filing Deadline or Not Filing at All

Explanation:

Some taxpayers put things off until too late. Others do not believe they must file, either erroneously or intentionally.

Impact on Your Taxes:

You will be penalized for not filing and for non-payment. Your tax balance will incur interest charges. You could be charged with tax evasion.

How to Avoid the Problem:

  • File on time, even if you cannot pay in full.
  • File for a filing extension by the deadline but be sure to pay the taxes.
  • Contact the IRS to set up an installment plan as soon as possible if you cannot pay in full.

Filing accurate income tax returns on time is essential to receiving a correct refund or calculating and paying the correct amount of taxes without overpaying.

Take the time to double-check your return and use a software application or have a tax professional prepare your return to minimize errors.

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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