Don’t Make These Common Mistakes When Filing Your Taxes
February 24, 2014 : Trent Hamm - Guest ContributorLeer en español
Ed note: Whether you use a tax pro, software or do-it-yourself on old-fashioned paper, there are a few very simple mistakes you want to avoid on this year’s tax return. Contributor Trent Hamm of The Simple Dollar outlines the simplest ones to check.
Tax season is upon us. We’re collecting our 1099s and W-2s, filling out our tax forms and filing with the IRS.
Naturally, with such a complex task, mistakes sometimes happen. However, the mistakes we make on our taxes can be very painful, resulting in potential penalties, tax corrections and unexpected bills. While the IRS will typically work with you to resolve minor mistakes, major errors can result in very stiff penalties.
Thankfully, most of the errors that people make on their income taxes are quite avoidable. Here are some of the most common mistakes, along with simple steps you can take to avoid them.
- Incorrect data, especially Social Security numbers, bank account numbers and addresses, can make it appear as though you have not filed your taxes at all or can cause your refund to be sent to someone else.
You can prevent this by simply double-checking every piece of data you enter on your tax forms.
- Miscalculations can cause you to overpay or underpay the amount you owe to the IRS, resulting in either an unnecessary “loan” to the IRS for months or a painful correction to your taxes later on.
You can prevent this by simply checking your calculations or relying on computer software or a professional preparer to handle the calculations for you.
- Late filing of your taxes can bring stiff penalties from the IRS. You can quickly be charged as much as 5% of your tax bill per month as a penalty, and it will rapidly escalate beyond that.
You can prevent this by making sure that you file by the April 15 deadline. File as early as you can so that you’re sure the task is completed. If this is impossible, you can file for an extension.
- Missing a 1099 can easily cause you to file an incorrect return. 1099s are mailed to you by organizations and businesses that paid you income in the previous year, including banks that pay you for interest on savings accounts, investment houses that pay you for dividends and employers that pay you for contracted work. These forms are also sent to the IRS, so you need to make sure that all of your 1099s are listed on your tax forms.
You can prevent this by keeping careful track of your 1099s as they arrive in the mail (I keep all of mine in the same manila envelope) as well as recording throughout the year which businesses should be sending you a 1099 at the end of the year.
As you can see, most tax errors are painfully simple, and you can easily prevent them, which is far better than facing action from the IRS. A little extra effort now means a lot less heartache later.