Every individual who is earning and falls under the tax bracket requires to file his/her tax returns. Filing taxes can be a very complicated process and it’s something you will have to do every year. However, many are unaware of how to file tax returns and often end up making common tax mistakes. So, it becomes mandatory to get familiar with the process to file tax returns to save yourself from making mistakes in the coming tax season (Jan, 28). But, you don’t need to fret at all. Since we are here to make you aware of the most common IRS mistake on tax return that you must avoid during filing tax returns.
Let’s take a look at some of the irs common mistakes to find out their consequences.
Most Common IRS Mistake on Tax return
1. Filing Status Errors
Some taxpayers file their tax returns with incorrect status. You are granted to file the form in these five statuses Married Filing Jointly, Married Filing Separately, Single, Head of Household, and Qualifying Widow/Widower) With Dependent Child. You must be aware of the status under which you are filing tax forms.
In addition, you need to keep in mind that the married couples filing separately are subject to different rules than joint filers. For example, if you are filing separately, then both spouses will be required to claim either the standard or itemized deductions but not one of each. You can use the tax bracket calculator to calculate your tax bracket and estimate the tax rate.
2. Mixing Business & Personal Expenses
It seems easier to make payments with the same credit card or from the same bank account for all your business and personal expenses, but it can make things complicated for you at the tax time. Later, you are required to deduct your personal expenses from the business expenses. To avoid such a mistake, you are suggested to make your personal payments from another bank account.
3. Mailing tax return to the wrong address
If you’re filling out a paper return, make sure you mail it to the right address. Often, returns that include payments go to a different place from returns that don’t have payments. Sending tax return to the wrong address may lead to processing delays. You can find out the correct address on the IRS website where your return should go.
4. Filing late, or never
Some taxpayers forget to file their tax returns till after the deadline (April, 15) or don’t submit them at all. Ultimately, the IRS will charge interest and penalties on anything they owe. Those who are unable to file the tax return on time, they have an opportunity to get a six-month extension. In order to get the extension, you need to file an extra form.
You are required to pay some extra attention to file accurate tax returns.
5. Missing or incorrect Social Security Numbers
While filing tax returns, many taxpayers forget to enter their social security number or any required information. Or they have entered the incorrect numbers in the boxes. Problems with names often occur when you have changed your name but have not notified the Social Security Administration.
The information entered by the taxpayer must match the agency’s records to complete the filing process of tax returns and everyone filing either singly or jointly must sign the document.
6. Incorrect Bank Account Numbers
If you are using DD (Direct Deposit) during e-filing, then you can avail of refund back in a few weeks. But, this can be possible only when you have provided the correct bank account number. This is the most common IRS mistake on tax return. Ensure that you have entered the right bank account number.
7. Forms not signed
Sometimes, taxpayers forget to sign the tax return in the rush to get the return in the mail. The IRS has mentioned this common mistake year after year. You must be aware of it that it is not just a mistake since an unsigned tax return is an invalid return. A tax return will only be taken into consideration when it has been submitted timely and properly signed. Also, you must keep in mind that if there is a joint return, then both spouses must sign the return.
For example, accounting firms will not release the electronically filed returns without a signed Form 8962. This must be signed and returned instantly.
8. Calculation Mistakes
It is obvious for a taxpayer to make the mistake if he/she is not using any tax software. In case, you are preparing returns manually, it becomes mandatory to double-check that you are utilizing the latest IRS tax tables version.
However, we recommend you to use free tax preparation software (offered by the IRS) to handle the calculations. Then, you just need to check the numbers entered by you as they display on your tax forms. You will also be able to handle addition and subtraction via tax preparation software, but you must be very careful while making any entry in case of transposing numbers. Since this software is unable to find entry errors related to transposing numbers.
9. Misunderstanding Extension Rules
If for any cause, you are unable to complete and file taxes till April 15, then you have an option to get a six-month extension to file your taxes. You are required to file an extra form to get an extension. However, this doesn’t mean you are permitted to just file the extension every year and put off filing your taxes that much longer. This extension is only an extension on filing your taxes, not on paying any taxes owed by you.
So if you usually end up paying taxes rather than getting a refund, you’ll want to avoid filing an extension. If you want to file for the extension, then late fees and penalties will start to add up over the six-month. Avoid all those extra expenses by just filing your taxes on time this year.
10. Not reporting all your income
You are not the only one who knows how much money you made this year. All forms not only sent to you but also they are also sent to the IRS. For instance, you need to include all W-2 forms along with the form 1099 from investments or bank accounts.
Even if you have made only a few ten or hundred dollars at a side job this year, you are required to report it to the IRS. It is mandatory to report all the income that you earned this year, no matter how small it may be.
A lot of things can go wrong at tax time. Take the time to understand your tax situation. As we know, small changes can save big money, after all. Although tax filing is an exhausting task, you need to avoid this aforementioned most common IRS Mistake on Tax Return and get your refund in no time. For any further assistance, you can talk to our experts at Accounts Confidant.