It is easy to make simple mistakes when filling out your tax form. Some of these mistakes are avoidable and can prevent the stress of receiving a call from the IRS. More people are filing electronically than ever before, which can help them to avoid making simple mistakes.
However, it is still possible to forget certain deductions and to fill in the wrong figures. Here are some simple mistakes to avoid whether you use e-filing or file on paper.
Filing late or not at all
You may be so overwhelmed that you put off filing your return until after the deadline or you don’t submit a return at all. The IRS won’t ignore this and will add interest and penalties to what you owe. It is possible to get a six-month extension automatically if you couldn’t make the deadline. It is much better to ask for an extension than to file a tax return full of mistakes.
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Choosing the wrong filing status
The filing status you select may be incorrect or may not be the most beneficial status for you. It can impact your tax bracket, tax credits, deductions, and how much tax you have to pay. Couples who file a joint return instead of filing separately could lose out on valuable deductions and tax credits.
Single parents with dependents who fail to select head-of-household status could also lose out. Dependent children who work cannot claim single status if they are dependents on their parents’ tax returns.
Missing out on credits and tax deductions
You may not be aware that you’re eligible for certain credits or tax deductions. For example, by not claiming a home office deduction when you’re working from home, you could be leaving money on the table. Certain conditions apply to claiming this deduction that you need to know.
Child care credits are often misunderstood and many people miss education credits too. Knowing what deductions you qualify for or credits due to you can help you to get the highest possible refund or pay the lowest amount of tax. Itemizing deductions, such as large charitable donations or large medical expenses, may be worth your while.
The IRS gets copies of all forms such as W-2s and K-1s. It will know if you haven’t added all your forms of income to your tax return. This could be rental income, dividends or money you earn from jobs other than your regular job.
Carefully total up all your sources of income on the forms to make sure what you report is correct. If the IRS sees you owe more than what you report, you will be on the hook for the extra tax, penalties and interest.
Messing up the numbers
An upside to e-filing is that you can avoid the mistakes of not understanding how to apply a tax table or not doing the math correctly. The online software generally catches any errors you make along the way.
If you choose to file on paper, take time checking your figures and make sure the final tallies are correct. You should always make sure your social security number is correct as it is easy to transpose the digits. If you want your money deposited directly into your account, you also need to make sure the IRS has the correct routing and bank account number.