You can owe even more money if you make any mistakes on your tax return. This means you might miss out on the full refund you claimed.
From interest and penalties to an audit from the IRS, tax-related issues on your return can open the door to many consequences. However, you can take measures to avoid this outcome altogether.
10 common tax return mistakes that can cost you a lot of money.
Here’s what you should avoid when filing your taxes every year:
1. Filing a tangible tax return instead of filing an electronic version
If your return is delayed or lost in the mail, the following circumstances could be a huge headache for you. That’s why it’s better to file your taxes electronically. This method takes significantly less processing time, and tax software can automatically check for tax breaks for you and apply the latest tax laws on your behalf.
2. Failing to report all your income, whether on purpose or by mistake
Report all your income, no matter the source or amount you received. Suppose you fail to include any income on your tax return. In that case, you may face interest charges or a late filing penalty — if not both — when the IRS inevitably discovers these discrepancies.
3. Making typos or errors when providing your personal information
Have you ever accidentally misspelled your name? What about forgetting a digit or two when writing down your Social Security number? Mistakes happen, but the IRS reserves the right to reject your tax return and request that you correct your mistakes.
4. Selecting a filing status that doesn’t accurately represent your situation
Did you know that your filing status will affect the tax rate applied to your income level? Likewise, it will also influence the tax breaks you are eligible to claim.
Choosing the appropriate filing status for your situation is vital. Otherwise, you could receive a lower tax refund, a bill for additional taxes, or be audited by the IRS.
5. Miscalculating information when doing math
Believe it or not, the IRS identified more than 9 million mathematical errors among tax returns submitted by taxpayers last year. From simple addition and minor subtraction issues to complex calculations, many mistakes resulted from taxpayers not taking their time when performing tax-related calculations.
This is a prime example of why it’s a good idea to double-check your math when preparing your taxes. Alternatively, consider using tax software that will do all the heavy math-related lifting for you.
6. Reporting your bank information inaccurately
You can choose to have your tax refund sent to your bank account as a direct deposit, though if you choose to do so, you should triple-check that the account number and the routing number that you supply the IRS with are correct. If you provide the wrong information, your bank will reject the deposit, or it will be sent to someone else’s bank account.
7. Mailing your tax return to the wrong address
Not everyone wants to file taxes electronically, and there’s nothing wrong with that! However, if you prefer to file a tangible tax return, double-check that your tax return contains the correct mailing address. Mailing your tax return to the wrong address could slow matters down, but note that your tax return will eventually be forwarded to the correct mailing address — it will just be delayed.
8. Forgetting to add your signature or the date to your tax return
Sounds like a small detail, right? Sure, but the IRS won’t accept your tax return if you have not signed or dated it, which can slow down the process. Also, if you’re filing a joint tax return, ensure you and your spouse sign and date the document.
9. Choosing not to make a copy of your return for your records
Tax experts recommend keeping a copy of your tax returns for at least three years. This is ideal if the IRS audits you. After filing your tax return, duplicate it or download it. Either way, keep a copy of your tax return in a safe place.
10. Needing more time but failing to file a request for an extension
If you need more time to file your tax return, complete Form 4868, which will grant you a request for an automatic six-month extension. This will prevent you from accruing late-filing penalties. However, you must either pay the taxes you owe by the original filing deadline or establish a payment plan with the IRS.
Don’t let these errors catch you off guard.
Take control of your taxes today. If you’re unsure or need guidance, working with us can help you avoid costly missteps and maximize your return. Ensure your subsequent tax filing is error-free and optimized for your financial future.
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