Making a mistake on your taxes can lead to frustration, worry, unnecessary expenses, and delays in receiving your refund. Worst of all, it can lead to being audited.
The IRS announced it is increasing small business audits by 50% in 2021. The number of individual audits is also expected to go up.
To reduce your chance of being audited, and protect yourself in case you are, we compiled a list of the most common tax filing mistake to avoid. Prevent yourself from committing any of these mistakes and it can save you time, money, and frustration in the future.
1. Math Errors
Math errors come in all shapes and sizes. They range from simple mistakes in addition or subtraction to selecting the wrong number from a tax table.
If you made a math error on your taxes, you most likely will receive a letter from the IRS. This is such a common tax filing mistake that the IRS will catch, correct the mistake, and then inform you. Don’t worry if you receive a letter from the IRS.
Math errors are avoidable by using software that handles most calculations for you.
2. Choosing the Right Filing Status
It is common for people to choose the wrong filing status, which makes a massive impact on your tax bracket.
There are five different statuses to choose from. The IRS website has an Interactive Tax Assistant (ITA), which can help you determine the correct status for you.
3. Incorrect Bank Account Numbers
This mistake can lead to major delays in receiving your refund. Most people set up direct deposits for taxes. If even a single number is inputted incorrectly then major delays will occur.
The fastest and safest way to share your banking information and ensure a speedy payment is by e-filing with direct deposit.
4. Errors In Tax Credits Or Deductions
Mistakes are common in inputting the earned income tax credit, child and dependent care credit, standard deduction, and other items. Filers need to pay very close attention when inputting any credits or deductions.
Utilizing a tax preparation service can greatly reduce the confusion with these items. A trained tax professional should be able to navigate credits and deductions on your behalf.
Errors with tax credits or deductions are a red flag for the IRS that can lead to being audited. If you are audited, you should contact a tax defense lawyer for help.
5. Electronic Filing PIN Mistakes
If you e-file, you will be asked to sign and validate your documents with a prior-year self-select personal identification number. If you do not have or remember your PIN, you can enter the adjusted gross income from a previous year.
The best tactic to ensure you always have your PIN from the previous year is by keeping copies of your tax returns in an accessible place.
Avoid These Common Tax Filing Mistakes
These are some of the most common tax filing mistakes made every year. By following this guide, you can avoid unnecessary delays, frustration, and worry.
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