As the tax-filing season unfolds (the October 15th deadline is just around the corner if you filed an extension), many taxpayers are doing their own taxes. Though it may seem like a good idea for the individual taxpayer, it’s important to watch out for common tax filing mistakes. Tax preparation software makes some errors like addition and subtraction blunders less likely, but even the best software cannot eliminate all potential problems and human error. (Also, every year, I have someone in my office who either used tax software or accounting software who did not know what they were doing, and they are being audited. Trying to save a few bucks by doing it yourself can be a really big and costly mistake.)
If you are getting ready to file your tax return, be sure to take a second (or third) look before you hit send. Keeping a close eye out for these common tax filing mistakes is the best way to ensure the IRS does not come knocking at your door.
Note: If you do get in trouble with the IRS and they claim you owe $10,o00 or more, reach out to our tax law firm, and we’ll schedule a confidential consultation to explain your options fully to permanently resolve your tax problem.
That said, let’s jump into the four common tax return mistakes that could land you in tax trouble if you self-prepare your tax return.
#1. Transposed Numbers
If the Form 1099 you receive shows $6,300 in income and you inadvertently enter $3,600 instead, the IRS may see this as a tax dodge instead of an innocent mistake. At best, transposing numbers will slow down your refund (if you qualify for one) and raise a red flag with the IRS and State of Indiana Department of Revenue. At worst, it could trigger an audit or further examination of your entire return.
IRS computers are very good at comparing the figures taxpayers report to those they receive independently from banks, brokerage firms, and other agencies. Be sure to double-check and verify every number you enter and make sure it is correct. Your tax software can tell you if your numbers do not add up, but it cannot catch transposed figures (“Garbage in, garbage out”).
#2. Misspelled Names
It is easy to misspell a name or transpose a Social Security number when entering dependent information, but doing so could cause real problems with your return. Be sure to double-check all your children’s names, ages, and Social Security numbers before sending your return to the IRS. The IRS looks at that information on whether you claimed the right amount of exemptions and whether you are eligible to claim and receive Child Tax Credits and the Earned Income Credit.
Do not assume that all of that information will be transferred from a prior year’s return.
#3. Missing Social Security Numbers
It is easy to forget this vital piece of information, and doing so could delay your return and cause long-lasting problems. You may assume that your tax prep software will automatically enter your Social Security number, but that does not always happen.
Be sure to give your Social Security number (and that of your spouse) one last look before filing your return. That last- minute check could save you a world of trouble later on.
#4. Not Reporting All Your Income or Taking Too Many Deductions
The IRS will likely get notified of income you received throughout the year, and it doesn’t just include your W2 wages. It’s important to keep track of all your income and report it to the IRS correctly to avoid any problems.
It can also be tempting to click a few extra boxes and input a few made-up numbers as deductions to bring your tax liability down. DO NOT DO THIS. Just because the software lets you do this, doesn’t mean you should. REPORTING FALSE INFORMATION TO THE IRS IS A CRIME! THE U.S. JUSTICE DEPARTMENT PROSECUTES PEOPLE WHO ENGAGE IN TAX FRAUD!! Don’t for a minute think that everyone does it. They don’t and stop for a minute and think how lame that sounds to a judge and jury. That logic is why a number of people have gone to jail for tax fraud. It is not worth ruining the rest of your life and also all of your family members’ lives, too.
I know the first thing you will do when you see what you owe will be to think about what you can do to bring down your tax bill. That’s normal, but they have to be legitimate expenses, deductions, and credits. It’s not the software’s job to tell you whether or not you should be taking that extra deduction or write off. It’s the taxpayer’s job, to be honest, and file their tax returns correctly. Carefully consider do you have good documentation to substantiate what you are claiming?