The 9 Most Common Tax Filing Mistakes – And How To Avoid Them
As Tax Day creeps closer, it can be tempting to dash through your return. Don’t. Rushing tends to result in mistakes – and those errors can slow processing of your tax return, resulting in delayed tax refunds or worse, a second glance from Internal Revenue Service (IRS).
The IRS has identified the nine errors that they see at tax time. The most common tax-filing errors to avoid are:
- Wrong or Missing Social Security Numbers. Transposing numbers can be as simple as typing faster than you think. And attempting to recall Social Security number (SSN) for your kids (I’ll be honest: I don’t know my kids’ SSNs by heart) can result in mistakes. Make sure you enter the correct numbers and then double-check them against the actual Social Security cards.
- Wrong Names. It’s not terribly likely that you’ll get your own name wrong – but you’d be surprised at how many taxpayers misspell the names of their spouse and/or dependent. It’s not always on purpose: the names on the tax return should match the names as they appear on your Social Security card and sometimes, the Social Security Administration (SSA) will get it wrong (my husband’s name was backwards on his card). Sometimes, there is simply an error on the card which means that when you enter the “right” name on your tax return, it will conflict with the information in the IRS’ system. Use the name which appears on your Social Security card. If you need to make a name change, you may need to contact SSA. For more on name changes, click here.
- Filing Status Errors. It’s important to choose the right filing status. There are five filing statuses to choose from: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) With Dependent Child. Each has a specific definition for tax purposes: you need to select the one most appropriate for your circumstances. For more on filing status, click here.
- Math Mistakes. One of the first things that the IRS checks on a tax return is math. In particular, the figures on those first two pages of your tax return need to add up. If you file a paper tax return, it’s easy to miss a number or two, so go slowly and double-check your math. One advantage of using software (or a tax professional) is that you don’t have to do the math on your own – which most people prefer unless you’re a math geek like me.
- Errors in Figuring Tax Credits or Deductions. The number of credits and deductions available to taxpayers can be overwhelming. Sometimes, it may appear that a credit or deduction might be appropriate when, in fact, you’re phased out due to your income or otherwise restricted from making the claim. Maybe you’ve already claimed the tuition and fees deduction for the same expenses that you are attempting to apply to the American Opportunity Tax Credit, or you’re not allowed to claim a specific tax break because of your filing status (filing as Married Filing Separately disqualifies you from a number of tax breaks). If you aren’t sure about a credit or deduction, read the instructions on the form carefully or check with your tax professional.
- Incorrect Bank Account Numbers. If you e-file and you use direct deposit, you can get your refund back in a few weeks. It’s fast and easy. But it’s only fast and easy if you provide the right information. Make sure you enter your bank routing and account numbers correctly. If you need help figuring it out, ask your bank.
- Forms Not Signed. Sometimes in the rush to get the return in the mail, you forget to sign the return – that’s actually a common mistake cited by IRS year after year. This is one case where a mistake isn’t just a mistake since an unsigned tax return is an invalid return. A return is only considered timely filed if properly signed and submitted. Keep in mind that if there is a joint return, both spouses must sign the return in order for it to be valid.
- Electronic Filing PIN Errors. And don’t think that signing mistakes can be restricted to paper returns: e-filed tax returns also require a signature in the form of a Personal Identification Number (PIN). You’ll be asked to select a PIN when e-file; you may also use your prior PIN if you e-filed last year. Finally, don’t confuse your e-filing PIN with an IP PIN. For more on the IP PIN, click here.
- Health Care Reporting Errors. With many health care reporting requirements making their (almost) debut, there are bound to be errors. IRS says the most common involve failing to claim a coverage exemption and not reconciling advance payments of the premium tax credit (for more on the APTC,click here). Early on, figuring the advance credits is a guessing game based on estimated income and personal exemptions and quite frankly, most taxpayers are getting it wrong.
So now that you know what the most common mistakes are, how do you avoid making them?
- Plan ahead so that you have the right information available. That includes Social Security numbers for your spouse and dependents and last year’s tax returns.
- Slow down. Most mistakes happen because taxpayers are rushing to get returns done. There’s no fire – and worst-case scenario, you can ask for an automatic extension. It’s better to file a thoughtful, complete and correct return on extension than a thoughtless, sloppy, mistake-riddled return by April 18 (remember that the due date is different this year).
- Read the instructions. If you aren’t sure about how to fill out a schedule or a form, chances are that IRS has a publication or instruction booklet that can help.
- Be neat. I constantly tell my kids that it doesn’t matter if they have the right answer if the teacher can’t read it. Ditto for the IRS. If the representative can’t read your return, it’s wrong.
- Check your work. You can catch most mistakes by double-checking your math, looking for signatures and checking to make sure that you’ve attached the correct schedules and forms.
- Again, mistakes happen. If you take a few moments to slow down and check your work, you can prevent a lot of these errors. That said, if you file and you realize that you’ve made one of these mistakes, don’t freak out. Mistakes can be fixed (to find out how to file an amended return, click here).
By Kelly Phillips Erb