About 80% of American taxpayers made at least one mistake in their tax returns that affected their tax refund. This is a surprisingly large number of people in a country with over 140 million taxpayers.
When it comes to tax prep, precision is key to meeting your tax obligation and at the same time to exercise your right to deductibles and refunds.
In a rush to comply with the IRS demands, most taxpayers make mistakes while filing their returns. Errors result in delays, penalties, and low or no refunds.
Below are eight common mistakes that people make on tax returns and how to avoid them.
- Incorrect Social Security Number
It is not difficult to recall your social security number. However, it is quite easy to make a mistake when writing it down. A lot of people are so confident when filling in their social security number because they know it by heart that they don’t double check what they enter.
Quite often, taxpayers fill in incorrect SSNs for spouses, children, and other dependents.
Always match the entered number to what appears on the SSN card. If you are filling out on paper, ensure every number is legible and distinguishable.
The IRS lists incorrect SSN as one of the most common errors when filing returns. Incorrect SSNs can get your file rejected.
- Misspelt Names and Typos
It is highly unlikely that someone would get their name wrong in any situation. But when it comes to the names of spouses and children, it is surprising how often spelling mistakes happen.
Always enter the names as they appear on the Social Security Card. Sometimes, the Social Security Administration (SSA) may somehow get the names wrong. For instance, the names could be written backward or misspelled on the card. In such a case, sort out the issues with the SSA, not the IRS.
If the names don’t exactly match with the corresponding SSN, the file will be rejected. So, ensure you not only fill in the correct names but also enter them in the correct slots to match with the SSN.
- Wrong Filing Status
Indicating your correct status is crucial in a tax return form. It is common for some taxpayers to ignore the significance of status in relation to tax. Some simply don’t understand the differences or are unaware of which status suits their situation.
There are five distinct definitions of status:
- Married and filing jointly
- Married and filing separately
- Head of household
- Qualified widow/widower with qualifying child/children
Remember, you can only select one status. Each status carries a significant tax implication, such as eligibility for certain deductions and credits. So, make sure to check the correct status.
- Unsigned Forms
The IRS reports that many tax return forms are often submitted unsigned. This usually happens in a rush to send in the papers on time. An unsigned tax return form is invalid; the IRS will only consider the return if all the relevant forms are clearly signed.
Remember that if you are filing for a joint return, the signature of your spouse must be included as well.
The IRS will send back unsigned forms, at which time it’s usually too late, and you’ll end up paying the penalty for late filing. To avoid this mistake, many taxpayers file their returns online where a digital signature is required and can’t be missed.
- Late Filing or Failing to Request an Extension
Tax return deadlines are very strict, with no exceptions. If you feel that you need more time to prepare your taxes, make sure to request an extension before the deadline.
The IRS can give you an extension of up to six months from the deadline to complete filing your returns. However, an extension will attract a late fee and is not an exception to paying taxes.
Don’t wait till the last minute to start preparing your taxes. Such a mistake could cost you a late penalty and disrupt your regular schedule for filing tax returns.
- Not Claiming Eligible Deductions and Credits
Many taxpayers don’t realize their eligibility for particular deductibles and credits. It is not exactly a mistake not to claim deductibles and credits, but making these claims could save you a lot of money.
Eligibility for credits such as Earned Income Tax Credit heavily depends on filling in the correct income details, status, and dependents. A pay stub in this scenario may come in handy while filing your taxes.
Other deduction claims that are often overlooked are the age-specific deductions. This is a tax deduction for taxpayers over the age of 65 or blind. Last year, the deduction was worth as much as $1,600.
Also, check your eligibility to claim dependents. Many people file the wrong details, which disqualifies them from making these claims.
Since many eligible taxpayers are unaware of these deductions and credits, they often go unclaimed.
- Wrong Bank Account Number
This is a common error that leads to delays in tax refunds. Ensure the routing number, and the bank account number are correct before submitting your tax returns.
- Math Errors
All the figures, especially those on the first two pages of the tax return form have to add up. It is easy to miss a digit, a decimal place, or a signature if you are doing the math by hand.
To ensure you don’t make any numerical errors, use a tax software application to crunch the numbers. But even then, you have to check your entries to ensure that you are not working with the wrong figures in the first place.
The IRS takes numbers very seriously in an attempt to curb fraud.
Take Your Time on Tax Prep
Most of these mistakes are easily avoidable. Read the instructions on the return forms carefully and understand what is required. Don’t be afraid to look up or ask about anything that might not be clear.
Once you have filled out a form, read through it multiple times while referring to the source information to catch and correct any errors. Take your time and don’t rush your tax prep.
Working fast or under pressure may increase the chances of making mistakes. Create a pay stub with the paystub maker as it easily and quickly helps you to prepare your tax returns. Get a detailed pay stub using our online generator at an affordable fee in just a few clicks.