Common Tax Return Mistakes That Can Cost You

This originally aired on the Catholic Faith Network’s show CFN Live: https://youtu.be/Uy7kkcUdOFg

It is that time of year again, when taxpayers must file their personal income tax returns. The IRS has compiled a list of the top nine common mistakes as reported on their government website.

Managing Partner, Vincent J. Russo, breaks these mistakes down into three categories:

1. Lack of Attention to Detail
2. Failure to Report
3. Errors in Judgement

Is it a mistake for taxpayers to file their taxes sooner than later?

Mistake #1: Filing too early

While taxpayers should not file late, they also should not file prematurely.

People who do not wait to file before they receive all the proper tax reporting documents risk making a mistake that may lead to a processing delay.

For example, filing before receiving the necessary documents may result in underreporting or over-reporting of income, missing out on eligible deductions and credits, and potentially triggering an audit by the IRS.

Tax Tip: File early for a refund, File by the deadline if you owe taxes.

What are some common mistakes as to missing or inaccurate information?

Mistake #2: Missing or Inaccurate Social Security Numbers (SSN)

Each SSN on a tax return should appear exactly as printed on the Social Security card.

Ensuring accurate Social Security numbers (SSN) as printed on the Social Security card is extremely important because the Social Security number serves as a unique identifier for each individual taxpayer.  The IRS uses this number to track and verify your income, tax payments and eligibility for tax credits and deductions.

Failing to provide the correct Social Security number or entering it incorrectly can result in processing delays, rejection of your tax return and potential penalties.

Mistake #3: Misspelled Names

Likewise, a name listed on a tax return should match the name on that person’s Social Security card.

Matching names on the tax return with the name on the Social Security card is crucial.  Pay close attention to spelling, middle names, hyphens and suffixes (like Jr., Sr., II, III).

What about financial errors on tax returns?

Mistake #4: Entering Information Inaccurately

Wages, dividends, bank interest, and other income received and that was reported on an information return should be entered carefully. This includes any information needed to calculate credits and deductions. Using tax software should help prevent math errors, but individuals should always review their tax return for accuracy.

Here are a few tips as to entering income information accurately which is extremely important:

Make sure that your name, Social Security Number (SSN) and address are correct on all forms.  Verify income amounts and double check the income reported on the forms (W-2, 1099s, etc.) with your records (such as pay stubs, bank statements, or investment account summaries) are accurate.

Ensure all forms are received.  If you expect a form (like a 1099) but haven’t received it, contact the issuer (bank, employer, etc.) as soon as possible.

Mistake #5: Incorrect Filing Status

Some taxpayers choose the wrong filing status: Single, Married filing Joint, Married filing separately, Head of Household or Qualifying Surviving Spouse.

Filing status can affect:

• Whether you must file a return
• How much tax you owe
• Credits you can claim
• The type of form you should file
• Your standard deduction amount
• Whether you get a refund

Selecting the correct filing status is an important first step.  The IRS provides a simple chart to help taxpayers determine the best filing status.  The chart offers questions that align with different scenarios (e.g. “Are you married?”  “Do you have children?).  It provides quick and clear guidance, making it easy to figure out the correct filing status.  You can find the chart in IRS Publication 504 or on the IRS website under “Filing Status” section.

If you are consulting with a tax professional, they can provide personalized advice regarding your filing status.  They have expertise in tax law and can help ensure you’re selecting the correct filing status.

Are math errors common mistakes on tax returns?

Mistake #6: Math Errors

Math errors are some of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, tax prep software does it automatically.

Checking for math errors is extremely important.  Math errors can lead to delays, incorrect tax calculations, or potential penalties.  Double-check all numbers when entering them into the return.  Transposing numbers is a very common error.

Another common error occurs when using simple addition or subtraction.  Using a calculator or spreadsheet tool to double-check your math before entering it into your return is helpful.  Most tax software will also provide error checks, but it is always good to confirm your totals manually as well.  In addition, make sure to round off amounts correctly.  For example, $10.49 rounds to $10 and $10.50 rounds to $11.  Tax software typically handles this automatically.  

How can taxpayers ensure they accurately calculate credits and deductions?

Mistake #7: Figuring Credits or Deductions

Taxpayers can make mistakes figuring things like their Earned Income Tax Credit, Child and Dependent Care Credit, Child Tax Credit, and Recovery Rebate Credit. Calculating tax deductions and expenses is one of the most tedious parts of doing your taxes. Digging up receipts and adding up totals can be a hassle.

To ensure accurate calculation of credits and deductions like Earned Income Tax Credit and Child Tax Credit you will need to review the eligibility requirements.

For Earned Income Tax Credit, you will need to review the income limits, qualifying children, income and filing status and investment income.

For Child Tax Credit, you will need to review the child requirements, income limits and credit amount.

To verify eligibility, you can use the IRS tools for both credits, accurately report income, check credit amounts and review dependent information.  By following these steps and using the available tools, taxpayers can ensure they accurately calculate and claim the appropriate credits and avoid costly mistakes.

Mistake #8: Incorrect bank account numbers

Taxpayers who are due a refund should choose direct deposit. This is the fastest way for a taxpayer to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax return.

Providing correct bank account numbers for direct deposit is crucial because mistakes in this area can lead to significant delays, errors in receiving the refund, or even the refund being deposited into the wrong account.  This can take weeks or even months for you to get your refund.  In some cases, it could result in identity theft issues or unauthorized access to your account if someone else gains access to your information.

Mistake #9: Unsigned forms

An unsigned tax return isn’t valid. In most cases, both spouses must sign a joint return. Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney. Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS.

It is crucial for taxpayers to sign their tax return before submitting it. 

Ensuring that all required forms are signed before submitting the return is very important.  The IRS requires that taxpayers sign their tax returns to validate the information provided.  Signing the return is a legal declaration that the information is true, correct, and complete to the best of your knowledge.

If you fail to sign your return, it will be considered incomplete, and the IRS will not process it.  This can lead to delays in your refund, or the IRS may reject your return entirely.  Additionally, signing your return ensures you’re acknowledging any tax liability or refunds due.

Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney.  Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS.

Additional Tax Return Tips

The IRS urges all taxpayers to file electronically and choose direct deposit to get their refund faster.

IRS Free File lets qualified taxpayers prepare and file federal income tax returns online using guided tax preparation software. It’s safe, easy and no cost to you. Those who don’t qualify can still use Free File Fillable Forms.

Taxpayers may qualify for IRS Direct File which offers online tax preparation, direct deposit of refunds and electronic filing, all for free. Some options are available in Spanish. Many taxpayers also qualify for free tax return preparation from IRS-certified volunteers.

Twenty-five states including New York State which offer Direct File as well.

For a successful and stress-free experience, remember, the tax code is dynamic, so it pays to be informed. Arm yourself with knowledge, explore the numerous resources available, and consider consulting a tax professional if you encounter any complexities.

Good luck, and may your refunds be high and your audits be nil!

We hope you found this article helpful. Contact our office today at 1 (800) 680-1717 and schedule an appointment to discuss what makes sense for you and your loved ones.