Income Tax Mistakes Can Hurt
Since all Americans have to file taxes, people often get busy about this time of year as they rush to meet the April 15 deadline for filing your Federal income tax return. Most Americans have a refund coming, so there’s no real hurry, but you can’t get a refund until you file. Since most of us are eager to receive our return as quickly as possible, we can often get in a bit of a hurry and being in a hurry leads to income tax mistakes.
Income tax mistakes can lead to overpaying taxes, underpaying taxes, or leaving you without a valid return at all, which means you won’t get your refund until you correct the return and resubmit it to the IRS. No one wants to do that, so it’s best to be aware of the simple and often obvious income tax mistakes that people frequently make and try to avoid them, if possible. Below are a few of the most common income tax mistakes and how you can avoid them.
Common Income Tax Mistakes
Wrong or Missing Social Security Number – As with your signature, your Social Security number, as well as that of your spouse (or family members) is required when you file. Failing to include your Social Security number or entering the wrong number is a good way to have your income tax return thrown out as invalid. Given that it’s just a string of numbers, it’s easy to make a mistake when entering the number either electronically or by hand. Be careful when this and double-check to make sure that you’ve entered your Social Security numbers correctly before filing your return with the IRS.
Getting your name wrong – Who gets their name wrong on their 1040 form? Lots of people, it turns out. Entering the wrong name is no different from entering an incorrect Social Security number or failing to sign your form, and it renders your return invalid. It’s hard to believe that anyone could get their name wrong, but people sometimes get in a hurry and misspell their name or recently-married people sometimes get careless and include the wrong name on the form. While it’s not a catastrophic mistake, it can lead to quite a delay in getting your return processed and will certainly hold up your refund.
Filing Status – It would seem simple to know if you’re single, or a head of household, or married and filing either jointly or individually, but checking the wrong box in the filing status section of the 1040 form is one of the common income tax mistakes. It’s not that people don’t necessarily know which box(es) they should be checking, but sometimes, the status can be complicated by divorce or separation and occasionally, by malice. Make sure you check this correctly, or you’ll be having to file again in a few weeks after the IRS returns your forms to you.
Bank Account Number – So, now it’s time to get that refund, and you’re all set to have them deposit it directly into your bank account. All you have to do is enter the name of the bank, the routing number and your account number…which thousands of taxpayers fail to enter correctly every year. This is the one part that will directly and immediately affect your ability to obtain your refund. If you get your bank account wrong, the money is either going to go to someone else or not be paid at all. Not good. Double check your bank account number before filing your income tax return.
Calculation Errors – This is becoming less of a problem as more taxpayers use tax preparation software to file their taxes but simple math errors are still fairly common income tax mistakes. If you’re doing simple math calculations such as addition and subtraction, it’s easy to make mistakes, and if you don’t double check them before filing, you could easily end up paying too much or too little on your taxes.
Forgetting to sign the 1040 form – This one seems so obvious that you’d think that no one, ever, would forget to sign their form, but it happens thousands of times per year. If you’re filing electronically or having your taxes prepared by a professional, you’ll be prompted to sign at the appropriate time, but if you’re filing your taxes “old school” and filling out your forms manually, you could easily forget to sign or forget that your spouse has to sign along with you. Failure to sign is the same as failing to file; a lack of valid signature on the 1040 form means you’ve filed an invalid return that cannot be accepted until you sign it.
The Biggest Income Tax Mistakes
Mistakes with tax deductions and credits – These types of income tax mistakes are pretty common and it’s not hard to see why. Our tax code is really complicated and it’s easy to get confused about which tax credits and deductions you’re entitled to take. If you fail to take deductions to which you’re entitled, nothing happens. If you take deductions to which you’re not entitled to take, you’re likely to get audited or run into problems. Earned Income Tax Credit and Child and Dependent Care Credit are the two credits with which taxpayers usually have the biggest problems.
A lot of taxpayers fail to realize that when they don’t take all of the deductions to which they’re entitled, they’re effectively giving money to the government. You’re free to do that if you like, but you’ve worked hard for your money, so why give it away? Why not take all of the deductions you’re allowed to take?
The reason that most people don’t do it is because they simply don’t know about all of the deductions they could be taking. That’s understandable; there are tens of thousands of pages in the tax code and keeping up with it is beyond the capabilities of most taxpayers, who usually have a lot of things to do with their spare time besides reading tax law.
That’s why you need to take advantage of a great resource that will show you exactly how you can save the most money possible on your taxes by legally maximizing your deductions. You won’t need to learn about tax language or legalese, either, as the information will be presented to you in simple, easy to understand plain English.
There are many common income tax mistakes, but the biggest one is failing to take all of the deductions that could be saving you thousands on your income taxes.