Tax season can be a stressful time, and making mistakes on your tax return can lead to delays, penalties, and even audits. Being aware of common tax mistakes and how to avoid them can help ensure a smoother and more accurate tax filing process. Here are some of the most frequent errors taxpayers make and tips on how to steer clear of them.

Filing Late

One of the most common mistakes is missing the tax filing deadline. The IRS typically requires individual tax returns to be filed by April 15th. Filing late can result in penalties and interest on any taxes owed. If you need more time, file for an extension using Form 4868, which gives you until October 15th to file your return. Remember, an extension to file is not an extension to pay any taxes owed, so estimate and pay what you owe by the original deadline to avoid penalties.

Incorrect Personal Information

Errors in basic information, such as your Social Security number, name, or address, can cause processing delays. Double-check that all personal information is accurate and matches your records. If you’ve changed your name due to marriage or divorce, ensure that the Social Security Administration is notified and that your tax forms reflect this change.

Mathematical Errors

Simple math errors are a frequent cause of incorrect tax returns. These mistakes can lead to underreporting or overreporting your tax liability. Use tax preparation software to reduce the risk of errors, or carefully double-check your calculations if you’re filing manually. Tax software automatically performs calculations, which can significantly reduce the likelihood of mistakes.

Incorrect Bank Account Numbers

Many taxpayers opt for direct deposit to receive their tax refunds faster. However, entering an incorrect bank account number can result in delays or the loss of your refund. Double-check your bank account and routing numbers before submitting your return.

Failing to Report All Income

All income must be reported on your tax return, not just what you receive on W-2s or 1099s. This includes income from side jobs, freelance work, rental income, and investments. Failing to report all income can lead to underreporting your tax liability and potential penalties. Keep thorough records of all income sources throughout the year.

Overlooking Deductions and Credits

Deductions and credits can significantly reduce your tax liability, but many taxpayers overlook them. Commonly missed deductions include:

• Student Loan Interest: Deductible up to $2,500 per year.
• Medical Expenses: Deductible if they exceed 7.5% of your adjusted gross income (AGI).
• Charitable Contributions: Deductible if you have proper documentation.
• Education Credits: The American Opportunity Credit and Lifetime Learning Credit can reduce your tax bill.

Make sure to research and claim all eligible deductions and credits.

Misclassifying Employees and Contractors

Business owners often make the mistake of misclassifying employees as independent contractors or vice versa. This can lead to incorrect tax reporting and potential penalties. Employees typically have taxes withheld from their paychecks, while independent contractors are responsible for their own tax payments. Ensure you correctly classify workers and meet the associated tax requirements.

Failing to Keep Proper Records

Maintaining accurate and organized records is crucial for preparing an accurate tax return and supporting your deductions and credits in case of an audit. Keep records of income, expenses, receipts, and other documentation throughout the year. Organized records make the tax filing process easier and can protect you during an audit.

Ignoring the Alternative Minimum Tax (AMT)

The AMT is a parallel tax system designed to ensure that high-income earners pay a minimum amount of tax. It applies to certain taxpayers who claim many deductions and credits. Use tax software or consult with a tax professional to determine if the AMT applies to you and calculate it correctly.

Not Seeking Professional Help When Needed

Tax laws can be complex and ever-changing. If you have a complicated tax situation, such as significant investment income, self-employment income, or major life changes, consider seeking help from a tax professional. They can provide valuable advice, help you avoid mistakes, and ensure you take full advantage of available deductions and credits.

Conclusion

Avoiding common tax mistakes can save you time, money, and stress during tax season. By filing on time, double-checking your information, accurately reporting all income, claiming all eligible deductions and credits, and keeping organized records, you can ensure a smoother and more accurate tax filing process. If you’re unsure about any aspect of your tax return, consulting a tax professional can provide the guidance you need.

Need help with your tax return? Schedule a consultation with us today and let us ensure your tax filing is accurate and compliant.