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7 Most Common Tax Mistakes

7 Most Common Tax Mistakes

Here are some of the most common tax mistakes filers make — and tips for avoiding them. 1. Making math errors. A simple math error could wreak havoc on your tax return. If you’re going to file a paper return, be sure to use a calculator or spreadsheet when crunching your numbers. Better yet, skip the paper return and file electronically. Not only is this a more convenient option, but if you file electronically, you’re less likely to make a mistake. The IRS reports that the error rate for paper returns is 21%, whereas it’s less than 1% for electronically filed returns. Best of all, if your income is low enough, you can file your return online for free. 2. Entering the wrong Social Security number. You might think you know your Social Security number (and your dependents’ Social Security numbers) by heart, but unless you’re 100% certain, it pays to bust out your card and check your memory against what’s in writing. If you submit a tax return with the wrong Social Security number, there’s a good chance it will get rejected. 3. Forgetting key deductions. There are a number of deductions available to taxpayers, but failing to claim those deductions is basically akin to throwing money away. If you’re a homeowner, for example, there are several tax breaks you can get, from the mortgage interest deduction to writing off your property taxes. Under the right circumstances, you might also be eligible to deduct mileage on your vehicle, medical expenses, and job-search costs. Finally, don’t forget to take a deduction for the charitable contributions you make throughout the year.

4. Missing out on tax credits. Tax credits can save you a significant chunk of money by directly lowering your tax liability. There are a number of credits available to tax filers, but the key is to know which ones to look out for. If you have children, for example, you may be eligible for the Child Tax Credit, as well as the Child and Dependent Care Credit. If you’re a student or are paying for a child to attend college, you could benefit from the American Opportunity Tax Credit or the Lifetime Learning Credit. Finally, if you’re a low-income household, you might qualify for the Earned Income Tax Credit. Unfortunately, many tax filers miss out on credits each year because they just don’t think to claim them, so explore your options before submitting your return. 5. Forgetting additional income. Many people who file erroneous returns do so because they neglect to include side income. It’s an understandable slip-up, but a major mistake nonetheless. Whenever you earn income, you’re required to report and pay taxes on your earnings. This applies not just to your salary, but to any additional source of money you might have coming in, whether it’s a dividend payment or interest in a savings account. To avoid this mistake, be on the lookout for 1099 forms from your bank and brokerage firms, and make sure to report any other type of extra income you bring in. 6. Failing to sign your return 7. Missing the filling deadline.

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