If you haven’t filed your taxes yet you’re not alone. According to the IRS 20-25% of Americans wait to file until the last two weeks before the April 18 deadline (this year). Let’s face it, even if you’re getting a refund, it’s never fun to sit down and take a good hard look at your financial situation for the past year. But by the time April arrives, you can’t follow Scarlett o’Hara’s example and “…think about that tomorrow”. When you file taxes, it’s all about the real numbers—which also means you’ve got to gather, and try to make sense of, all the year’s documents. If you’re anything like us, every year you swear you’re going to set up an organized filing system and every year you wind up wrestling with an overstuffed box with a hodgepodge of invoices and receipts.
Last-minute scrambling makes an already stressful situation more stressful so you’re more likely to make mistakes. IRS Commissioner John Koskinen advises: “We encourage people to use the tools and information available on IRS.gov, particularly given the long wait times we anticipate on our phone lines. As always, taxpayers can benefit by filing electronically.” To help ensure you avoid penalties and fees and get your refund quickly, here are 15 common mistakes people make when they file taxes.
1. Misspelled Names Yes, one of the most common mistakes people make when they file taxes is misspelling their own, or family members’, names. This includes using different names (nicknames, abbreviations, etc.) on different parts of the return. You must write your name as it appears on your social security card to ensure your return goes through smoothly.
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2. Math Errors Are you one of those people who can add up the same column of numbers three times and get three different totals? If so, be sure to quadruple check the math on your return to avoid penalties and ensure you get your full refund.
3. Failure to Sign Whew! You filled out the return checked the math and you can make it to the post office just in time for the April 18 postmark. Don’t forget to sign it! The IRS will not accept unsigned returns so it’s essentially the same as missing the deadline completely. That will delay your refund and you’ll have to pay a late filing penalty.
4. SSN Mistakes All those numbers! Although you do not want to get this one wrong, it is a fixable mistake. Generally the IRS will send you a letter asking for an amended return if your information doesn’t match their files. If you e-file your return will be rejected immediately so you can fix it right away.
5. Wrong Forms Determining which form(s) you need to file can be even more confusing than the math. The IRS suggests you use the simplest form that fits your situation—which is true most of the time. The more complicated forms also offer more ways to take deductions and that could increase your refund or lessen what you owe.
6. Wrong Filing Status Using the wrong filing status can affect your entire return and could even amount to fraud. The good news is that you can file an amended return if you realize your mistake after you’ve sent your forms.
7. Missed Deductions Even if you file the most basic tax return, you may qualify for deductions on things like student loan interest or adult education. This is where it pays to do your homework. Or at least use filing software like TurboTax which can alert you to possible deductions.
8. Failure to Report Extra Income It’s more and more common these days for people to have several different income sources. If you freelance occasionally or were paid for a small project on the side, you need to report that income. Employers are only required to send you a 1099 for freelance income over $600, however you are still responsible for declaring ALL of your income even if you don’t get a 1099.
9. Charitable Donations Many charitable donations are tax deductible, so be sure to declare what you can. On the flip side, don’t try to get creative with padding the dollar amount—an unusually high number here is something the IRS red flags for a possible audit.
10. Failure to Declare Last Year’s Refund This one can be confusing. You do not need to declare last year’s federal tax refund as income this year. However, in some cases you may need to declare state and local tax refunds as income on both federal and state returns the following year.
11. Wrong Bank Account Number If you select direct deposit for your refund, make sure you get your bank account number right! Using the wrong number can result in delays or even loss of your refund.
12. Not Double-Checking Income Forms Employers aren’t immune from making math errors. Be sure to double-check income forms like 1099s and W-2s for accuracy.
13. Student Loan Deductions Student loans are a huge burden for recent (and not so recent grads). Don’t forget to deduct your student loan interest.
14. Bitcoin Although part of the attraction of bitcoin is living off the grid, the IRS expects you to declare bitcoin income and it can be rather complicated if you made many transactions. The IRS considers bitcoin to be property (like stocks) rather than currency so you’re reporting capital gains.
15. Filing Late Last, but definitely not least, filing taxes late is a common and costly mistake. If you realize that there’s no way you’ll be able to get it together by the fifteenth, you can apply for a six month extension instead. The deadline for applying for an extension is also the eighteenth. Be aware—this is a filing extension not a tax extension—you will owe the IRS interest on any 2015 taxes that aren’t paid by April 18 so this should always be a last resort for freelancers or anyone who may owe taxes at the end of the year.