7 Common Mistakes with Tax Returns and How to Avoid Them

Paying taxes isn’t enjoyable, but it’s essential to supporting growth and infrastructure in the United States. The Internal Revenue Service collected nearly $5 trillion in taxes, thanks to the tax returns that citizens and residents filed. Most taxpayers are happy to pay what they owe and leave it at that, but you could be leaving hundreds or thousands of dollars on the table.

Knowing what you’re doing to prevent mistakes with tax returns and understanding the tax deductions and credits you’re eligible for will help you make your money go further and navigate tax season with peace of mind. You’ll meet your tax filing deadlines and ensure everything is in order.

Fortunately, you’re in the perfect place to learn about the common mistakes taxpayers make each April when filing their taxes. Continue learning to make your money work for you today!

  1. Misspelling Names and Addresses

Mistakes happen, but you should always correct your name and address when filing your taxes. It’s one of the most basic mistakes you can make, and one small mistake can result in a letter from the IRS. Errors with spelling or using your maiden name will result in issues that hold up your tax return.

The IRS can only process your tax return if names are spelled correctly and the correct addresses are used. Your tax return will get sent back to you so you can make the necessary corrections before resubmitting it.

Double-check the spelling and addresses on all your tax returns to ensure everything is accurate. You want to avoid getting penalized for small mistakes that you can avoid.

  1. Filing Too Late

As tax season approaches, you should also know the tax filing deadlines so you’re prepared in advance. People have learned to dread April 15th, but organizing your documents will allow you to greet that date with a happy and free spirit. You can also apply for an extension if time is running out to file your taxes with the IRS.

Get an extension and complete the tax filing deadline to avoid a penalty from the IRS. The fine is often five percent of what you owe in unpaid taxes. The penalty worsens if you wait longer after the deadline to pay what you owe.

Set reminders in your phone and calendar so you remember to file your taxes on time. You won’t want to waste your hard-earned cash by failing to pay on time. You can learn more here about tax relief options if you need help to come up with the money.

  1. Filing the Wrong Form

Taxes are confusing because you might fill out dozens of forms depending on your assets and financial situation. Filling out the wrong form will result in a tax return the IRS can’t process. Supplemental forms and extra documentation are common in filing taxes, resulting in more documents that add to the confusion.

You’ll need to refile with the proper forms if you make the mistake of using the wrong ones with your initial return. It pushes the timeframe back, and you risk missing the filing deadline.

Working with an accountant is the best way to ensure you file your taxes correctly. They’ll help you find the correct forms for all types of taxes so you can file without fear of getting audited or having your taxes sent back. 

  1. Not Reporting Full Income

Failing to report your entire income is another common mistake with tax returns as April 15th approaches. Most people believe you only report the income on your W2, but there are other forms you must fill out to report all income. You’re expected and required to report all income earned over the past year.

That income includes tips you’ve received, completed freelance work, and casino winnings. You’ll incur additional penalties and fees if you fail to report income and get audited by the IRS. It’s a situation you’re best off avoiding by reporting the money you made.

  1. Filing the Wrong Status

Your filing status significantly impacts the money you pay to the IRS when filing your annual taxes. It’s a simple mistake to forget to change your filing status after getting a divorce, but the IRS experts will surely notice your error. You’ll still be expected to pay the higher tax rate of filing as a single individual.

You’ll also pay more in taxes for the past year if you’ve recently married and forget to change your filing status to reflect that. You won’t get an intimidating letter, but the IRS will happily let you pay more in taxes.

  1. Not Claiming Tax Deductions and Credits

You’re leaving significant money on the table if you don’t understand the credits and deductions you qualify for. Working with a tax expert is the best way to find ways to save money when tax season arrives. Consider deductible business expenses, and use the Solar Tax Credit if you’ve recently added solar panels to your home.

  1. Forgetting to Sign

The most embarrassing mistakes with tax returns are the simple ones, and you’ll rue the day you forget to sign your tax documents when filing with the IRS. The average taxpayer spends hours and endures several headaches preparing their taxes. Forgetting to sign and date the documents is easier than you’d think.

The issue is that the IRS can only process your tax returns if you sign and date them. Double-check to ensure you’ve signed and dated the checks and documents before mailing them.

Avoid These Mistakes With Tax Returns Today

Preparing your taxes takes time and effort, and it’s easy to make simple mistakes with tax returns that result in a letter or a missed deadline. Double-check your name, address, signature, and date when filing tax returns, and ensure you’re filing the proper forms. Work with a tax expert to discover the tax deductions and credits you qualify for.

Maintaining your finances is crucial for a happy life and early retirement. Check out our Finance and Business content to map your financial future today!

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