Watch Out for These Common Tax Errors
With April 15 coming up in a matter of weeks filing your tax returns will soon be off your to-do list – if you haven’t already filed.
But being busy with work, kids or running a business can cause us to make mistakes on tax returns. Some mistakes seem small, but can have a big impact when it comes to getting your return. (Like forgetting your signature.)
Other returns are more substantive. Here’s a look at some of them.
- Claiming the Making Work Pay Tax Credit: If you file Form 1040 or 1040A, you’ll use a Schedule M form to figure out this credit. But make sure to get it right. It’ll help you determine whether you’ve already received the full credit in your paychecks or if you have more money coming your way.
- Direct Deposit Information: Taxpayers can have their refunds deposited into as many as three accounts. But entering the wrong account or routing number can cause you to lose your entire refund. It can go to another person’s account or back to the IRS, and there’s no IRS procedure to recoup lost funds transferred electronically.
- Understating Income: Your Social Security number is linked to your bank and investment accounts, and it also acts as your personal ID number with the IRS. So when you make any income, the IRS finds out the same time you do. Forgetting to include income on your tax return can lead to the IRS making you pay taxes on it, including interest.
- Deduction Mistakes: Everyone wants a smaller tax bill, so it can be tempting to make tax deductions that are “iffy” at best. Working at your home office can lead to some creative tax deductions (like that new coffee maker you bought) but it can lead to bigger problems down the line. Making sure your deductions are legitimate is an easy way to avoid problems with the IRS.
Other tax mistakes are much easier to make: entering the wrong Social Security number, basic math errors and misspelling a dependent’s last name, to name a few. But a small tax mistake now can lead to a big tax bill later.
If tax mistakes by you or a business partner are bringing you IRS scrutiny, make sure to have a tax attorney on your side. Facing the IRS alone can be intimidating, and is a tax mistake you could later regret.