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5 tax filing mistakes you should avoid

By Rebecca Lake
January 24, 2020

Filing your tax return may not be high on your list of fun ways to spend a weekend. But filing taxes is one of those chores you can’t put off, especially if you want to avoid landing in hot water with the IRS. 

To better prepare for tax season, you can minimize your stress by avoiding these 5 common filing mistakes. To learn more, read on. 

1. Missing out on tax credits

When filing taxes, it pays to take advantage of tax breaks. 

Tax credits, for example, can help reduce what you owe in taxes for the year on a dollar for dollar basis. 

A tax credit is just what it sounds like: a credit against the amount of tax owed. That’s different from a tax deduction. Deductions are amounts you can subtract from your taxable income for the year. 

Some of the most valuable tax credits include:

  • Earned Income Tax Credit. This credit is available to low-income earners who have qualifying dependents and those who meet the guidelines for claiming the credit without qualifying dependents
  • Child and Dependent Care Credit. Taxpayers with eligible dependents may be able to use this credit to offset out-of-pocket costs for childcare.
  • Savers Tax Credit. This tax credit is designed for lower to middle-income earners who make contributions to a qualified retirement plan. 
  • American Opportunity Tax Credit and Lifetime Learning Credit. You can claim these credits if you paid eligible higher education expenses.
  • Child Tax Credit. This is a credit available to taxpayers with dependent children.

Each tax credit has its own eligibility rules. They also differ when it comes to how much each credit is worth. 

How to avoid this mistake

You can avoid missing credits by researching which ones you’re eligible for. 

For example, if you have kids, you might be able to claim:

  • Earned Income Tax Credit
  • Child Tax Credit
  • Child and Dependent Care Credit

If you’re a student or the parent of a student, you might be able to claim the American Opportunity Tax Credit or the Lifetime Learning Credit. Young adults who are just starting their careers may be eligible for the Savers Tax Credit.

The IRS offers a breakdown of eligibility guidelines for each credit but that can get confusing if you’re not a tax pro. Another way to find out what you’re eligible for is to use tax prep software to prepare your tax return. Online tax preparation companies can review your information and tell you which credits you might be missing out on. 

2. Filing under the wrong status

Filing the correct tax status matters because it determines what you’re eligible for when it comes to claiming tax credits and/or deductions. It also helps you determine how much tax you owe. 

How to avoid this mistake

The best way to avoid this is make sure you file the correct tax status. For example, you don’t want to file single when you’re eligible to file as head of household. These kinds of mistakes can add up to lost opportunities for getting a bigger tax refund. 

Remember, there are five filing statuses you can choose from:

  • Single. This status is for unmarried taxpayers who don’t qualify for another filing status. 
  • Married filing jointly. Married couples who want to pool their income, tax credits and deductions may choose this status. 
  • Married filing separately. This status can be used by married couples who would prefer to pay income tax independently of one another.
  • Head of household. Being head of household means you’re single or married but separated and maintain a home for yourself and at least one qualifying dependent. 
  • Qualifying widow(er) with a qualifying child. This status allows you to maintain the tax benefits of married filing jointly status for two years after your spouse’s death. 

If you’re not sure which status you choose, the IRS offers a helpful tool to decide. 

3. Neglecting to organize your paperwork

When you’re trying to get your tax return together and hit the tax filing deadline on time, organization is your best friend. If you’re missing key documents, such as W-2s or 1099s, or you don’t have receipts for deductible expenses, you run the risk of filing late or missing out on a tax break that can reduce your tax liability. 

How to avoid this mistake

If you want to be organized for tax season, it’s good to get an early start. There are a few ways to get organized, including:

  • Using an expense tracking app to track deductible expenses, including charitable donations
  • Choosing to file your taxes online and using the import feature to add your W-2s or 1099s
  • Creating a filing system for paper receipts, with receipts organized by month and/or expense category
  • Maintaining a checklist of documents you’ll need to file your income tax return

You can also track expenses using your bank account. If you primarily spend from your checking account, for example, you can review your electronic or paper statements for the year to see where your money went. 

4. Providing the wrong information

Waiting until the last day to file taxes or trying to rush through it can backfire in a big way. If you’re not careful and include incorrect information on your tax return, your tax filing can become a major headache.

For example, entering a wrong digit on your social security number can trigger a red flag with the IRS. Likewise, putting a digit in the wrong place when entering your income or deductions can throw off the calculations for how much tax is owed. 

Banking mistakes can also happen. Say you’re planning to file taxes online and get your refund delivered to your bank account via direct deposit. Accidentally typing in a wrong digit for your account number can send your refund to someone else. In that case, the IRS won’t get your money back for you; you’ll have to try to recover your misplaced refund. 

You can also make a mistake when entering payment details if you’re paying your taxes online. In this case, the payment may be rejected – meaning you’ll have to schedule it again. For this error, you may be charged a returned payment fee by the IRS. 

How to avoid this mistake

A simple way to avoid errors when preparing your tax return is to know what to look out for. Here’s a quick checklist of things to double-check before submitting your return:

  • Name and address
  • Social security number
  • Employer’s federal and state identification number
  • Bank account deposit number and routing number

You should also review any numeric entries you make for income, tax credits or deductions. Going over your return carefully can help you avoid issues when paying taxes. This way you can look forward to an expected refund without added stress. 

5. Waiting until the last day to file taxes

Waiting until the last day to file taxes isn’t ideal; you’re better off being the early bird. There are several reasons why you should carefully observe the tax filing deadline (in most years, April 15th).

Perhaps most importantly, filing late can trigger a failure-to-file penalty, along with a failure-to-pay penalty if you owe taxes. Aside from that, dragging your feet on filing your tax return can make you more susceptible to tax fraud. Filing early, on the other hand, means fraudsters have less opportunity to file a phony return using your personal information. 

How to avoid this mistake

Getting your tax return in on time and avoiding negative consequences all goes back to being organized and understanding what’s expected of you when it comes to paying income tax. You might have questions like ‘Do I have to file taxes’? or ‘What happens if you file taxes late’? Those are questions you don’t want to try to answer at the last minute. 

So, get organized now. For starters, check with your employer to learn when you can expect your W-2 and start working on organizing your receipts.

From there, you can set a personal deadline for filing your tax return, ahead of the April deadline. The more prepared you are, the smoother your tax filing should go. 

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