You tear open the letter marked “Internal Revenue Service,” wondering whether it contains an unexpected refund. But, to your dismay, you find that you owe more than you projected because of a mistake on your tax return. Your heart sinks as you figure out where you’ll get the money to pay the bill.
To avoid this scenario, it’s important to exercise caution when filling out your taxes to avoid an error that will come back to haunt you. Keep these 6 tax blunders in mind as you do your taxes.
- Getting the Credits and Deductions Wrong: The U.S. Tax Code is 6,871 pages. When you include the federal tax regulations and the official tax guidance, the number of pages rises to approximately 75,000. Even if you consider yourself an old hand in tax prep, there are bound to be breaks and rules you don’t know. Whether it comes from a software program or a live human tax professional, it makes sense to get help when you have complicated taxes. This is especially true if you have a business or make money from a side gig.
- Making Math Gaffes: Are you a pencil-and-paper kind of person? If so, you must be especially careful with your calculations at tax time. A tiny mistake in your numbers could mean a huge problem later. So double and triple-check your data, and don’t be afraid to have another family member look at it to proof your work. Also, consider filing for free online at irs.gov to avoid any mistakes.
- Using Stale Personal Information: If you’ve been doing your taxes for a while now, it’s easy to get in the habit of just carrying over your data from the previous year’s return. But if you’ve had a child or changed your marital status in the past year and forget to include this information on your return, you risk costing yourself quite a bit of money.
- Missing Signature(s): It sounds basic, but you’d be surprised how often people forget to sign their tax returns. And if you are married and filing jointly, you both need to sign. While you’re at it, add “Double check Social Security number(s)” and “Remember to include payment” to your pre-finalization checklist. You want to avoid a delay and the penalties and interest that can come with it.
- Overlooking Charitable Giving: If you’re like most people, you give money multiple times per year to different charities. When it comes time to do your taxes, you must document everywhere you donated money. Get in the habit of tracking your charitable giving, whether by keeping receipts in a folder or scanning them and storing them electronically.
- Not Filing: If you plan on not filing because you aren’t required to because of a low income level, be aware that doing so could mean missing out on an earned income credit. This could take money out of your pocket. On the other hand, if you’re avoiding sending in your tax forms because you owe more than you can pay, be aware that you are only making things worse for yourself by not filing. Instead, contact the IRS about an installment agreement or an extension so you can come up with the funds over time.
Final Thoughts
We all hope to get a refund at tax time and try hard to minimize our tax liability, but sometimes you need to pay. If you owe taxes, rather than stress why not save up a buffer fund in advance? Then you have some or all of your liability covered. If you don’t owe anything, you have a nice bonus to save or celebrate with! We make saving for quarterly or annual taxes easy with our Tax Saver account.* Your small automatic deductions build over the year with healthy interest to leave you with a nice tax nest egg as needed. Good luck with your taxes, and we wish you an tax blunder-free year.
*APY = Annual Percentage Yield. APY is the annualized rate based on a compounding period of one year. When the deposited money earns dividends and the accumulated dividends starts earning dividends as well, we are talking about compounding. Fees could reduce the earnings on an account. All yields except Certificate yields are subject to change retroactively to the beginning of the month.
