Filing taxes can be a stressful task for individuals and small business owners alike, and even a small mistake can lead to penalties, delayed refunds, or an IRS audit. By being aware of common tax filing mistakes, you can take the necessary steps to avoid them, making tax season smoother and stress-free. Here are some of the most common errors people make when filing taxes and tips on how to avoid them.
1. Filing Late or Missing Deadlines
One of the most avoidable mistakes is missing the tax filing deadline. Filing late can result in penalties and interest on any unpaid taxes, increasing your overall tax bill. The IRS typically sets April 15th as the deadline, but it’s important to check each year in case of changes.
How to Avoid It: Mark your calendar with the tax deadline and consider filing early. If you can’t meet the deadline, apply for an extension using IRS Form 4868. This will give you an extra six months to file, although any taxes owed are still due by the original deadline.
2. Incorrect or Missing Personal Information
Something as simple as a typo in your Social Security number or a missing signature can delay your tax return processing or even cause it to be rejected. Mistakes in basic information are surprisingly common but can easily be avoided with a little extra care.
How to Avoid It: Double-check all personal information, including your Social Security number, address, and bank account details (for direct deposit). If filing jointly, make sure all information for your spouse is correct as well. Sign your return electronically or manually, depending on how you file.
3. Choosing the Wrong Filing Status
Choosing the correct filing status is important because it determines your tax rate and eligibility for certain deductions and credits. Common filing statuses include Single, Married Filing Jointly, and Head of Household, among others. Selecting the wrong one can result in paying too much or too little in taxes.
How to Avoid It: If you’re unsure which filing status applies to you, use the IRS’s interactive tool or consult a tax professional. Major life events like marriage, divorce, or having a child may change your status, so it’s important to review your options carefully each year.
4. Math Errors
Manual calculation errors are one of the top reasons for tax return adjustments. From simple addition and subtraction mistakes to incorrect figures, these errors can delay processing or result in paying more taxes than you actually owe.
How to Avoid It: Use tax preparation software to minimize math errors, or hire a professional accountant to handle the numbers for you. Even if you do the math by hand, double-check your work before submitting your return to catch any potential mistakes.
5. Overlooking Tax Deductions and Credits
Many taxpayers miss out on valuable deductions and credits, like the Earned Income Tax Credit (EITC), education credits, or deductions for business expenses. These tax breaks can significantly lower your tax bill, so it’s important to claim all that you’re entitled to.
How to Avoid It: Keep detailed records of your expenses throughout the year and review a list of available tax deductions and credits before filing. Tax software can help identify deductions you qualify for, or you can consult a tax professional to ensure you don’t miss out.
6. Failing to Report All Income
Whether it’s from a side gig, freelance work, or investments, all income must be reported on your tax return. Failing to include additional income can lead to penalties and interest charges, especially if the IRS receives a 1099 form that you forgot to include.
How to Avoid It: Keep track of all sources of income throughout the year, including freelance jobs, investment dividends, and rental income. Review all tax forms sent to you (such as W-2s and 1099s) to make sure you report every dollar earned.
7. Neglecting Estimated Tax Payments
Self-employed individuals, freelancers, and business owners often need to make estimated tax payments throughout the year. Failure to make these quarterly payments can result in penalties for underpayment, especially if you owe more than $1,000 when filing.
How to Avoid It: Calculate your estimated tax payments for the year based on your projected income and make quarterly payments by the IRS deadlines (April 15, June 15, September 15, and January 15 of the following year). Using tax software or consulting a tax professional can help you stay on track with payments.
8. Not Keeping Proper Records
Poor record-keeping can lead to missed deductions, incorrect income reporting, or difficulty verifying your return in case of an audit. Without proper documentation, you could miss out on tax-saving opportunities or run into issues if the IRS questions your filings.
How to Avoid It: Maintain organized records of all your income, expenses, receipts, and tax documents throughout the year. Use accounting software or a digital filing system to keep everything in order, so you have easy access when it’s time to file your taxes or respond to IRS inquiries.
Avoiding common tax filing mistakes comes down to careful preparation and attention to detail. By filing on time, double-checking your information, taking advantage of deductions, and keeping accurate records, you can ensure a smooth tax filing experience. If you’re unsure about any part of the process, consider using tax software or consulting a professional to help you avoid costly errors and get the most out of your return.
