In 1789, Benjamin Franklin wrote in a letter that the only certainties in this world are death and taxes.
So, since we must file our tax return with the IRS, the tax collecting agency, before April 15 every year, it is in our best interest to avoid the most common mistakes that are usually made and that result in the delayed processing of our refund – if we are entitled to one – or sometimes, in even more serious consequences.
The IRS warns us about avoidable but very common errors that cause unnecessary delays in processing. Depending on our particular situation, sometimes the tax assessment concludes that we have to pay the difference, and other times, we are owed a refund because we have paid more taxes than necessary during the year.
One of those mistakes is entering your social security number incorrectly, or forgetting to enter it. If you file jointly with your spouse, or if you have dependents, you should make sure that their social security numbers are also present and without errors.
Another important issue is the names that appear on the return, both yours and those of your spouse and dependents, if applicable. They must be written exactly as they appear on file with the Social Security Administration, so if your name has changed due to marriage or divorce, you must first change your name with the Social Security Administration before filing your taxes under that new name.
Some people have difficulty figuring out the taxable amount of their IRA distributions, pensions and annuities, or Social Security benefits. To make these calculations easier, it’s a good idea to use a tax preparation program, or if you file on paper, fill out the worksheet in the instructions. If your tax return is more complex because you have a business or other situation, it’s a good idea to seek professional help before filing an incorrect return.
Another common mistake is the math calculation. To avoid this, double-check your calculations until you are sure they are correct, or better yet, file your tax return electronically and the program will help you with the calculations.
Make sure to list all of your income, both large and small, and make sure your employer provides you with the necessary receipts to file your taxes.
Generally, all entities mail these documents in January, so be careful with the mailman and don’t accidentally discard them when they arrive.
Employers report what they pay you to the IRS, so if you don’t report it, the IRS could send you a letter demanding that you pay back the difference you owe them, or you could get into even more serious trouble.
One area where costly mistakes are often made is incorrectly claiming credits and deductions, especially the Earned Income Tax Credit, or EITC, the premium tax credit, which applies to taxpayers who buy health insurance through the Health Insurance Marketplace, and the standard special contribution for people who are blind or elderly. You may also qualify for other credits or deductions, so don’t miss out on them, because each one means money in your pocket.
Did you have a child? Did you adopt? Did you buy a house? Electronic tax filing software helps with the calculations for these types of credits and deductions.
Another mistake many taxpayers make when filing their taxes is choosing the wrong filing status. These are: single, married filing jointly, married filing separately, head of household, widowed, or qualifying widow(er) with dependent child. The IRS Interactive Tax Assistant can help you choose the right filing status. To get started, go to IRS.GOV and type “filing status” in the search box.
Although it may seem unbelievable, and with the desire that we all have to receive money, a common mistake is to incorrectly write the bank account number where the deposit should be made. If you are due a refund, you will be left sitting waiting for the dollars to arrive if you do not give the correct bank account.
Finally, if you mail your return, be sure to sign and date it. If you are married and filing jointly with your spouse, you both must sign and date the form. If it is not signed and dated, the IRS will return it to you unprocessed. Tax preparation software can help you avoid this error by guiding you through the process of signing and filing your tax return electronically.
I have never met anyone who enjoyed doing their taxes, but the reality, as Franklin said, is that they are unavoidable. So it is best to do them properly from the beginning, in order to avoid delays and complications that are a hassle to solve.
There is nothing romantic about letters from the IRS, so it is best to avoid them altogether.
