The process of filing taxes may be intimidating and difficult, and if you’re not cautious, you might make a mistake that costs you. Every year, it’s the little things that cause taxpayers to pay more than they should.
5 tax mistakes people frequently make and how to avoid them
1. Filing your taxes late
You don’t want to miss the deadline for submitting your taxes. Missing the deadline isn’t only a frustrating error; it’s also a costly one.
- You’ll be charged 0.5% of the outstanding debt every month, up to a maximum of 25%.
- If you have a Failure to File Penalty and a Failure to Pay Penalty in the same month, you will have a total penalty of 5% for each month or even part of that month, that your tax return was late.
- Interest is charged on both the overdue tax and the penalty.
The best way to avoid extra cost and stress is to simply plan ahead and prioritize your taxes. If you missed the deadline due to unforeseen circumstances, you should request an extension as soon as possible.
2. Inputting wrong numbers
One of the most common errors people make is entering incorrect numbers on a tax form. We’re not talking about a miscalculation; we’re talking about incorrectly inputting the numbers. It happens! It’s important to check and double-check your bank account information and other figures when filing your taxes.
In addition to the cost, you’ll have a hard time requesting a direct deposit refund if your information isn’t correct. You’ll have to undergo a thorough verification for the system to confirm your identity and to correct the mistake you made.
3. Filing with an incorrect name
Greetings to the newlyweds! Although it’s common for a spouse or partner to assume a new last name when getting married, it is important to inform the IRS first before using it. One mistake many people make when filing taxes is the mismatch of names due to a change in status. Couples who have recently gone through divorce are not exempt either and must also notify the Social Security Administration for a name change. Some people even accidentally misspell their name.
If your name and Social Security number do not match those on file with the IRS, your tax return may be denied or the process halted. If you’re experiencing this situation, here are some ideas to keep in mind to help you deal with the problem.
- Always double-check your return for mistakes.
- If you submit a joint return, ensure that the SSN you provide is for the primary taxpayer.
- Notify the Social Security Administration to get your Social Security number changed to your new name.
If you haven’t reassigned your number to your new name, you can just use the name that matches your number.
4. Forgetting to sign
Forgetting to sign the bottom line is an all-too-common mistake. While you will not be penalized at first, you will experience a delay in getting any expected return. And if you owe taxes and wait until the deadline to file, neglecting to sign the return might result in a late charge and penalty. If you forgot to sign the form, then you haven’t filed with the IRS, as far as the IRS is concerned.
Don’t allow a few careless errors to cost you money. Spending minutes double-checking your return might result in more money in your bank account when you need it.
5. Filing too early
While it’s not a good idea to file taxes late, you shouldn’t file too early. There may be tax deductions opportunities you could miss if you do not include all the financial documents needed when you file your taxes.
The bottom line
Whether you owe money or are waiting for a tax return, stress levels tend to rise around this time of year. Tax anxiety and the ongoing worry about filing taxes can affect your day-to-day life.
If you’re stressed, you’re more likely to make mistakes. And mistakes could result in missing out on the refund to which you’re entitled. The best way to avoid errors and keep more of your hard-earned money is to continue to learn about your finances and take the time to fill out all your forms very carefully. Take note of the common mistakes we just talked about and double-check your work before you file your taxes.
This post was originally published in February 2022.