Tax season is quickly approaching and the filing deadline will be here before you know it. If you haven't filed your taxes yet, it's time for action. You should get started by getting your tax return together, organizing all of your information and double checking your returns to make sure that they are complete and accurate. In order to help you file your tax return right the first time, here is a handy checklist of the seven most common tax mistakes that you should avoid.
1. Missing/Wrong Social Security Number
According to the Internal Revenue Service, one of the most common errors that people make when filling out their tax form is forgetting to include their Social Security number. The IRS receives thousands of tax returns each year with no Social Security numbers attached or with the wrong Social Security number.
Failing to include the right Social Security number for yourself or your dependents will hinder processing of your tax return. If you enter the wrong Social Security number, the IRS will reject all deductions and exemptions that you claim. This will hold up any refunds that you are owed and can leave you subject to late fees if you owe the IRS money. You can avoid making this mistake by double checking your Social Security number and those of claimed dependents before submitting your return. Verify every number by looking at Social Security cards.
2. Failing to Include All Sources of Income
You have to include documentation of your income with your tax return. Be sure to include copies of all W-2 forms that you received during the year. Make sure that you add in any 1099 income and miscellaneous income that you earned as well.
Failing to report any income that you received will make the IRS think that you are hiding something and they may seek to take a closer look at your return. This could be in the form of asking for additional documentation or even an audit. If you know that you earned income from a company during the year and have not received the appropriate forms, contact the company. Request a W-2 and 1099 from all employers. You don't want to find out that you are liable for additional taxes after the fact.
3. Math Mistakes
Despite the increasing number of options available for tax filing, many people still file their returns manually. Filing manually may save you money but it also leaves you open to the possibility of making common mathematical errors. Too many tax filers file incorrect returns because of a simple calculation error or placing the wrong digit in the wrong column.
This may be a small error but it can leave you owing a large amount of money. The IRS will charge you based on the amounts that you write on your tax return. If you make the mistake of claiming too much income or too little in deductions, you could find yourself having to pay more in taxes than you would otherwise have to. You can avoid making mathematical mistakes by double checking all of your numbers with a calculator or using tax preparation software. Tax software does the calculations for you, and significantly reduces the likelihood of errors in your return.
4. Claiming the Wrong Amount of Credits and Deductions
The biggest mistake that tax filers make is claiming either too many or too few deductions. Both mistakes are detrimental. Millions of Americans claim credits and rebates that they are not eligible for. Taking too many illegal deductions could be construed as tax evasion by the IRS and leave you at risk of being audited. In a worst-case scenario, tax evaders can face jail time. It's best to play it safe when it comes to paying your taxes. If you owe the money, pay it.
That said, not taking advantage of deductions that you are legally entitled to is foolish as well. You could end up with a larger tax liability than you need to. Take advantage of every legal deductions and tax credits that you are eligible for. Be sure to deduct all charitable contributions, gifts and contributions that you can write off. If you are unsure about what credits and deductions you should apply for, contact a qualified tax professional.
5. Forgetting to Sign and Date Your Return
Don't spend hours filling out your tax return and making sure that every number is correct only to forget to sign your name and date the return. You would be surprised how many times this mistake happens. If you forget to sign and date your return, the IRS will not accept it and will list your account as having not filed. In this case, your return will be considered late, which will leave you liable for penalties and interest.
Take a minute and make sure that you and your spouse have both signed and dated your tax return. If you want to skip the headache of signing, you can file your return using E-file. E-filing allows you to submit an electronic signature, freeing you of the burden of signing and mailing your return.
6. Failing To File Your Taxes
Filing your taxes late is perfectly legal as long as you have requested an extension in advance. Too many people skip this step and fail to alert the IRS that they will be missing the April 15 deadline. Failing to file an IRS tax return in a timely manner will result in additional expenses.
If you are going to be late filing your taxes, be sure to file your extension request in advance. You can download Form 4868 from the IRS website. Once approved, you will receive a six-month automatic extension that gives you until October 15 to file your return. Filing late does not exempt you from having to pay taxes and fees on any money owed.
7. Forgetting To Include Your Payment
Check the envelope to make sure that you included your check or money order with your tax return. If you do have a tax liability, write your Social Security number, tax form number and tax year on the check or money order. This will make sure that your payment is processed properly and keep you from having to pay interest and late fees. You can also e-file, which will let you make your payment electronically. If you are unable to pay the full amount, contact the IRS to make payment arrangements.
The Bottom Line
As you can clearly see, it pays to have a checklist when filing your taxes. Spending a few extra minutes double checking your return can save you all the trouble of having missed something important.