Filing taxes online is convenient, but also quite daunting. Small mistakes can lead to delays, audits, and even penalties. Here’s a closer look at five common mistakes taxpayers make and how you can avoid them for a stress-free experience:
1. Entering Incorrect Personal Information
Your personal information is the foundation of your tax return, and even a single wrong letter or number can cause major issues. Here are some personal details you must triple-check:
- Full legal name
- Social Security Number (SSN)
- Date of birth
- Current address
- Bank account or routing number
- Spouse and dependents’ information
Your name and SSN should appear on the tax return exactly as it is on your Social Security card. Remember that the IRS attempts to verify your routing numbers before depositing funds. So, make sure there are no typos or missed letters.
2. Not Using a Tax Prep Software
In 2024, taxpayers made over 6 million math errors. One of the easiest ways to avoid this is to use tax prep software. It is designed to walk you through all the steps, choose the right forms, and catch common mistakes. A tax preparation software adjusts as you go, asking tailored questions based on your income, job, and dependents.
Many tax prep software offer free versions under special circumstances. For instance, taxpayers with simple tax returns can qualify for Turbotax free.
3. Using the Wrong Filing Status
Your filing status impacts your tax rate, standard deductions, and eligibility for certain credits.
The five IRS filing statuses are:
- Single
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying surviving spouse
If you’re eligible for more than one filing status, thoroughly understand the terms and conditions of each option to make an informed decision. For instance, many single parents select Head of Household instead of Single since the former offers a higher deduction.
4. Skipping Deductions and Credits
Tax laws are complicated, and many taxpayers miss out on valuable tax-saving opportunities. For instance, parents can claim the Child Tax Credit or Child and Dependent Care Credit. Moreover, those who moderate or low income can claim the Earned Income Tax Credit (EITC). IRS reports that millions of workers miss out on EITC. This includes workers who are:
- Grandparents raising their grandchildren
- Native Americans
- Veterans
- Self-employed
- Living in rural areas
- Not proficient in English
Luckily, tax prep software, such as TurboTax, asks the right questions to determine whether you’re eligible for certain deductions and credits. Think of it as your personal tax assistant, double-checking everything and making sure you save as much money as possible.
5. Filing Too Late or Too Early
While it’s tempting to file your taxes as quickly as possible, the urgency can backfire. Filing before receiving all your tax documents, such as W-2s, 1099s, or investment statements, can lead to an IRS correction. Premature filing can also result in missed income.
On the flip side, waiting till the last moment isn’t great either. There is a greater chance of math errors, technical issues, and missed deductions.
File your taxes once you’ve gathered all the necessary documents and leave time to review everything.
To read more content like this, explore The Brand Hopper
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