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Common Mistakes to Avoid Making on Your tax Return

August 30, 2015  |   Tax Advice,Tax Tips   |   Tags: , ,  

Even when taxpayers are cautions while preparing their returns, errors can still occur. The IRS corrects simple errors, such as miscalculations, without you having to file an amended return. For other errors such as incorrectly claiming credits and/or deductions, you may need to amend your return and file again. Serious errors such as understatement of income can trigger an IRS audit and may lead to tax debt.

tax mistakes

Some of the most common errors taxpayers make on their tax returns are:

Math Errors

Miscalculations are a common error on tax returns. After the IRS corrects the error, they will send you a letter to inform you of the error and the correction. You may or may not owe taxes after the correction. If you do, you should pay the amount owed before the filing deadline to avoid a penalty for late-payment.

Name and Social Security card Mismatch

Usually, this error occurs when you change your name and do not report it to the Social Security Administration (SSA). If your name is different on your tax return and your Social Security card, your refund may be delayed; the IRS will resolve the difference before issuing your refund.

Claiming Wrong Tax Credits and Deductions

A common error made by taxpayers is claiming a credit or a deduction that they do not qualify for. When the IRS comes across a wrongly claimed credit or deduction, they remove it, and inform the taxpayer about the error, the change, and any resulting liability. The amount owed must be paid before the filing deadline to avoid a late-payment penalty.

Improperly Claiming Dependents

Claiming of your child(ren) as dependents is straightforward. But when you are financially supporting and caring for a dependent that is not your relative, your claim can become complicated. There are various qualifying factors that a dependent must satisfy to be claimed as a dependent; such as the dependent’s age, income (if any), relation to you, and the months in a year he/she lives with you. If a dependent qualifies, you can claim him/her on your return only if no one else is claiming the dependent.

Direct Deposit Errors

You can add multiple bank accounts (no more than three) to get your tax refund directly deposited. You can receive your tax refund into more than one bank, but the more bank accounts you add, the greater the chances of making an error.

Understatement of Income

You are required to include all taxable income on your return. Even if you erroneously do not include income from a source, the IRS may consider it an attempt at tax evasion or tax fraud. Another risk with understating income is that if you do not pay the additional taxes you owe before the filing deadline, you will be charged penalties and interest for each month that a balance remains unpaid. Such errors may also trigger an IRS audit.