Making an error while filing your taxes is perhaps the perfect definition of "a costly mistake". Tax filing mistakes may even incur penalties that mandate paying an extra fee or fine. Quite a number of things may cause an error when filling your taxes, but it's best to take note of these most common pitfalls to avoid paying extra on your taxes. Let's examine the top ten mistakes to avoid.
What Are Common Tax Mistakes?
1. Making mistakes with your basic information
These are simple things that can be corrected at a second glance but are commonly looked over. The basics include information such as your name and social security number. Always ensure that your name is spelled correctly and your social security number is written without leaving any numbers out. Additionally, make sure to properly select the right status when filing a tax. Select single or married as appropriate.
2. Reporting incorrect income information
Information reported to you must be recorded the way it's received. It is easy to make some errors, so it is crucial to cross-check all income details such as dividends, wages, and additional incomes. Look through the K-1,1099, and other forms carefully. If you spot any errors on the forms themselves, have them rectified by the issuers, and don't make the correction yourself while filing while the wrong details on the report sent remain incorrect.
3. Entering information in the incorrect places
Always enter the information in the correct space provided for each. You should not fill in the information in the wrong box. For example, the line allotted to reporting distributions is not to be used for any rollovers. To avoid this error when filing your taxes, some experts encourage the use of software to minimize any errors.
4. Making numeric typos
Checking for typos when filling in will not only prevent incurring a fine but also avoid paying more on your tax bill! It's all too easy to skip numbers or write a number incorrectly. Penning down a wrong amount may affect the number of deductions you may have taken, and therefore leave you paying more in tax instead of paying less.
5. Indicating a negative number incorrectly
A common mistake that you can easily fall victim to is indicating a negative number with the minus (-) sign. Although this comes subconsciously to most, IRS computers may not read it correctly. It's best to use brackets (example:  to indicate -10) to ensure accuracy and avoid costly errors.
6. Not paying your tax bill properly
If you don't pay taxes properly or through the right channel, then you may run into big problems. While you may pay, if - for example - you don't have the payment credited to you, this can end up counting as a missed payment. Therefore, if you pay online or by paper, make sure to include the 1040V form with your check. Alternatively, use a free online tax payment platform like EFTPS.gov, or use a credit card from the IRS' payment provider.
7. Not making it clear where to send your refund
Not making it clear where your tax refund should go can also count as a tax error - you're losing out on your money! As shown by some previous examples, an error may not attract a fine - instead, it may make you miss out on some benefits. In the case of a refund for overpaid tax, the IRS will send the check via mail. But you can get the payment faster by adding your bank details and routing number. In this way, the refund gets paid directly to the bank account; fast and simple. You may even opt to spread the payment out to different accounts.
8. Throwing away your tax documents after filing
Not keeping a copy of your signed return can cost you in the long run. Additionally, not keeping signed tax documents can also be a costly mistake. When applying for loans you may need to submit past tax information. If some copies of the tax return are missing, the IRS charge as high as $50 to send a spare copy. To avoid spending extra, always try to keep copies of signed returns and documents.
9. Reporting multiple jobs incorrectly
If you have more than one job, the IRS expects you to submit the W-2 forms from both employers. The withholdings and wages on the form must be included in your tax return.
10. Making mailing mistakes on physically filed returns
Make sure to take note of the postage when you are filing your tax electronically. This is to avoid the postal service returning it due to incomplete or incorrect postage. Also, you may send the taxes to the wrong IRS office since different IRS offices handle the taxes of different regions.
How to Avoid Tax Mistakes?
In conclusion, the key point to keep in mind is to carefully file your taxes and check well for errors of all sorts. If you run a business, it's best to have an accountant on hand to handle your taxes professionally. Overall, when taxes are filed correctly, you not only avoid the possibility of an audit or paying extra charges but also get to enjoy tax benefits when you qualify.
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