Avoid Costly Mistakes on Your Tax Return
“Making mistakes can be very costly. In terms of missed deductions or triggering an IRS letter or audit; a tax professional can help eliminate errors and ensure your returns are prepared correctly” (Source).
Here are 7 of the most common mistakes we see on tax returns…
1) Missing or inaccurate information
Always remember to include the correct spelling of your name and your social security number exactly as it’s printed on your Social Security card. It’s also imperative that all information such as your wages, dividends, and bank interest are entered correctly. Similarly, make sure to double-check any calculations, including any addition, subtraction, etc. While the IRS can send you a notice explaining any errors you might have made, this will delay the process overall.
2) Filing too Early
You shouldn’t file too early simply because you would like your refund early. You risk forgetting to submit documents or important information. You might also forget to submit an amended tax document that may be sent a couple of weeks after the original tax document, which could incur additional costs. This is very common with investment statements that report stock sales and dividends.
3) Figuring credits or deductions
Avoid mistakes on credits and deductions by having your tax preparer assess your financial situation and confirm the details for you.
4) Incorrect bank account numbers
If you provide or verify the wrong account number, you may receive your refund via check instead of direct deposit. If you accidentally include an account number that belongs to another person, they might receive your refund instead, which will be a major workaround to get resolved.
5) Unsigned forms
If you do not sign your tax return, it is invalid. For joint returns, both spouses must sign, barring exceptions for members of the armed forces and other unique situations.
6) Incorrect filing status
Your filing status impacts your tax bracket, the amount you owe, and the credits and deductions you claim. Make sure to select the correct one to maximize your refund and minimize your liability.
7) Paper filing instead of filing electronically.
When you paper file your return, you’re more likely to make any of the above mistakes if your forms are already disorganized or in the wrong order. You could also forget to put enough postage on the envelope or send your return to the wrong address, two important details you won’t want to miss. The IRS highly recommends e-filing as the safest and most organized method of filing your return. Bonus: you’re also more likely to receive your refund faster.
What if I make a mistake on my return?
If you do make one of these mistakes, a couple of things could result. The IRS may discover the error and send you a notice to correct it (delaying your refund), or your return may be processed with the error and you could be audited. This may result in a surprisingly large tax bill with added interest.
However, if you believe you’ve made a mistake on your return, you may be able to amend it. You will definitely want to amend your return if you forgot to include income such as W-2s, K-1s, and 1099s. These tax forms are reported to the IRS, and thus the IRS will send you a notice about 18 months after you file. Amending your return will avoid a letter and stop any penalties and interest that may accrue. (Click here to learn more.)
Don’t “Go it Alone.”
Taxes can be confusing, but they don’t have to be overcomplicated. Although you may be tempted to “go it alone” and complete your own tax return, situations like owning a business or getting married or divorced may complicate your return beyond what you can handle. Not only that, but completing your own return means you may miss out on deductions that a tax professional would otherwise spot. For more information about complex tax situations that may require you to hire a tax professional, click here.
Our qualified EAs and CPAs are well-versed in understanding federal and state tax code. We also act as advocates who provide services that go beyond completing your return, including providing year-round financial guidance and support. Your peace of mind about your financial situation is our top priority.
Want to learn more?
Here are a few more resources to help answer your questions…
Common Tax Return Mistakes That Can Cost Taxpayers – IRS
6 Common Tax Mistakes When Filing Taxes That are Easy to Avoid – Intuit Turbotax
Top Tax Filing Mistakes and How to Avoid Them – Investopedia
Blog by Daniel Walters – Tax Accountant
Learn more about Daniel and the rest of the Storen Financial team here.