5 tax mistakes to avoid

When it comes to filing your taxes, avoiding common mistakes can be a big gain. Errors on your tax return can lead to delayed refunds, penalties, and even an IRS investigation.

Here are some of the most common tax mistakes, and tips on avoiding them:

1. Missing the tax deadline
Know when your taxes are due. If you miss the April deadline and owe the IRS money, penalties and interest start accumulating immediately, for each day that passes. If you’re due a tax refund, failing to file on time could delay that refund. Requesting an extension gives you more time to file your tax returns. But remember – any payment is due in April, meaning the longer you wait to file, the more you owe. (And it’s worth noting that the penalty compounds daily!)

If you miss the April deadline and owe the IRS money, penalties and interest start accumulating immediately… [and] the penalty compounds daily!

2. Arithmetic errors
Tax forms require you to record a lot of numbers and do some arithmetic. It’s important to check and then double-check the figures you input and any calculations. Errors can lead to penalties – and even an audit. You can decrease your chance of making arithmetic mistakes by using software or online tax programs that do the calculations for you.

3. Failing to claim additional income
Earning income from multiple sources makes your taxes more complicated. That’s true whether you work as a contractor or an employee, or if you’re simply earning interest on investment or savings accounts. Each job or account should issue you a Form 1099, which denotes how much you earned. The IRS receives a copy as well. Be sure to keep track of any additional income, and account for all of it in your return. Otherwise, you may have to pay interest on the unreported income or face a penalty.

4. Skipping the signature
One of the easiest mistakes is forgetting to sign your taxes! The IRS doesn’t process unsigned returns, so be sure to put your John Hancock where your forms require it. If you file electronically, you must use your personal identification number, or PIN, to sign your tax return.

The IRS doesn’t process unsigned returns, so be sure to put your John Hancock where your forms require it.

5. Misdirecting your direct deposit
If you get a tax refund, consider having it directly deposited into your checking account, or better yet, deposited right into savings. However, it’s crucial that you check the routing and account numbers you include on the tax forms. If you make a mistake here, you may not get your refund – and someone else might.

Filing your taxes properly and on time is key to avoiding penalties and receiving any refund you’re owed. A financial advisor or tax professional can help answer your tax questions and ensure that you don’t make mistakes. Remember that, according to the IRS, ignorance is no excuse, and even small errors get expensive quickly.

FOR MORE INSIGHT

On avoiding mistakes
A beginner’s guide to filling out your W-4 (Lifehacker)
Withholding calculator FAQ (Internal Revenue Service)
Free tax return preparation for qualifying taxpayers (Internal Revenue Service)
Use the Earned Income Tax Credit assistant (Internal Revenue Service)

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