There aren’t many people who enjoy doing their taxes. If I’m being honest, is there anyone who actually enjoys completing their tax forms every year?
When faced with a project that feels more like pulling teeth than anything gratifying, our natural response is to push the project as far down our to-do lists as possible. This procrastination is often to blame for simple mistakes that end up being very costly or time-consuming for an individual to eradicate.
Don’t wait until the last week to organize bank statements, unearth receipts that have been hidden in folders and pockets throughout the year, or gather all other important documents that are necessary in completing your forms. This will result in a rushed filing and, according to the professionals, the more you rush, the more likely you are to make mistakes, which can result in costly penalties, delays in receiving your refund, or a higher risk for an audit.
Here are the 6 common tax mistakes that individuals make that are easily avoidable:
1. Math Miscalculations
The math involved when filing your return is enough to give anyone a headache, but even moreso for those who have difficulty understanding and applying basic math. If you prefer the classic pen-to-paper method of filing, I strongly recommend using a calculator or a spreadsheet. If you don’t have a preference, this may be the year to consider filing electronically. The IRS reports that error rates for paper returns typically come in at around 21%, which is substantially higher than the 1% of error rates that happen when electronically filed. Depending on your income, you can even file electronically for free.
2. Not Filing On Time
If you have all of the necessary documentation to file your return, waiting until the last minute to file may just be mentally taxing. However, in a lot of cases, late filers will experience problems when filling out their returns that will cause them to miss the deadline, resulting in penalty fees and interest on the taxes they do owe. Give yourself time to file! If you know you are going to be cutting it close, file for an extension.
3. Incomplete Or Incorrect Information
You are not always going to be required to fill out every space on a return, which makes it difficult to see when you do forget an important section. Have last year’s return visible so that you can at least be sure that you covered those bases, but then make sure to read over the return carefully in case there is a section that would apply to this year that didn’t apply to a previous year. When re-reading your return, make sure to double-check that all numbers are recorded properly and everything is spelled correctly.
4. Missed Tax Deductions Or Credits
If you are rushing to file, you only have time to think about the obvious information you are required to report. But what about the deductions or tax credits that you may be eligible for? These are not going to seem as obvious, which is why people need to do a little researching before filing. Having children, being a student, or living in a low-income household are all examples of tax breaks that are available to tax filers that could apply to you.
5. Unrecorded Additional Income
Your salary is not the only income that you will report on. If you worked a side job at any point during the year, or have any additional source of income coming your way, you must report it when you are filing your tax return. Depending on when your oversight is detected, you could end up owing penalty fees and interest on what you didn’t report.
6. Missing Signature
Perhaps one of the simplest aspects of filling out your return, you would be surprised at how many people forget to sign their names as the final step of the process. An unsigned return cannot be processed by the IRS, so it’s crucial that you remember to do this. And if you are filing a joint return, both spouses will need to sign. For electronic returns, your virtual signature will take the form of a PIN number that you will receive.
If you are anticipating being overwhelmed as you begin to fill out your tax returns, get help. This will ensure that you don’t overlook any aspect of the filing process, big or small. Because as you can see in these mistakes listed above, even the smallest mistakes can hold significant consequences.