11 common tax mistakes
Taxes are complicated and you're in a hurry, a recipe for error. Mistakes happen -- but avoid the obvious ones to maximize the money and minimize the wait.
This post is from Brandon Ballenger at partner site Money Talks News.
Messing up on taxes is common. In the best case, it may just mean a delayed refund. But it can also mean a smaller refund, spending extra money and time to amend your return or, in the worst case, facing an audit.
Tax software helps you avoid a lot of errors -- especially in math -- but it can’t provide personal information or replace common sense. These days, that’s where the most frequent mistakes happen.
In the video below, Money Talks News founder and CPA Stacy Johnson covers some of the most common tax errors, which thankfully have easy fixes. Check it out, and learn more on the other side. (Post continues below video.)
The tax code runs thousands of pages and is constantly changing, so it's easy to make mistakes. But experience shows we tend to make the same ones, over and over. Here’s a checklist to help you out:
- Social Security info. What’s on your Social Security card goes on the return. If your name is wrong or changed, contact the Social Security Administration. Getting your number wrong, or that of a dependent or spouse, is even worse: The number might belong to someone else. This kind of error can stop the process.
- Math. Software can help, but in some cases you may still have to tally numbers on the side to enter totals. Triple-check your work.
- Signature. It’s like turning in homework without your name on it: no name, no credit. Make sure you sign your return -- and the check, if you’re sending one.
- Wrong form. Again, software often helps you pick the correct forms. But sometimes using a 1040EZ won’t get you as much money as a 1040 or 1040A. And certain situations require additional forms or numbers in different places. For instance, where you claim a home office deduction differs depending on whether you are an employee, self-employed or a business partner.
- Paying. There are a lot of tax software options, with varying fees for preparing, filing and amending, not to mention state returns if that applies. But if your income is under $50,000, chances are you can get your taxes prepared and filed for free.
- Going pro. If you have a simple tax situation that hasn’t changed much since last year, there’s no reason to pay a professional to put your information into the professional version of software you can buy (or get free) yourself.
- Waiting for a check. Filing your return electronically through the IRS Free File is always free, no matter what your income or situation. Sign up for direct deposit and your refund will most likely hit your account in less than two weeks. Don’t forget to triple-check your bank account number, however.
- Hiding income. This can happen accidentally if you have multiple employers or if a W2 or 1099 goes missing. But take your time, think it through, and make sure you report all income -- not just from your job but also from investments and anywhere else that might be reporting to the IRS.
- Missing deductions and credits. Polonius from Hamlet said, "Neither a borrower nor a lender be." He was a jerk. But he was right. too -- don’t leave money on the table for the government.
- Taking out a refund loan. If you’re desperate for your refund money, realize the interest charges on a refund anticipation loan or check only make things worse. Here's a better idea: Change your tax withholding so you get bigger paychecks year-round.
- Procrastinating. Tax Day is April 17, and many people have already received their refunds. Don’t short-change yourself by waiting until the last minute, then rushing through your tax preparation. That's how you make dumb mistakes and forget things that could have lowered your bill.
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