Six Tax Filing Fumbles: Avoid These Common Mistakes

Filing taxes can feel like navigating a complex game. In baseball, errors are tracked meticulously as part of the official statistics. Similarly, in basketball and football, turnovers are closely monitored, often serving as a pivotal factor in determining the game’s victor. In the tax world, mistakes, or "miscues," can also have significant consequences.

With a nod to Dawn Delia, a seasoned federal tax attorney at Delia Law, this article summarizes six frequent errors taxpayers commit when filing their federal tax returns. Avoiding these pitfalls can save you time, money, and potential headaches with the IRS.

1. Incorrect Personal Details: A Recipe for Delay

One of the most frequent, and surprisingly simple, mistakes is submitting incorrect personal information. This includes entering the wrong Social Security number, misspelling names, or providing an incorrect date of birth.

"It’s easy to mistype a digit or letter, especially when using tax software or filling out forms manually," says Delia. "Additionally, your name on the tax return must exactly match what’s on your Social Security card – adding or omitting a middle initial, for example, can lead to confusion."

Errors in your personal information can delay processing or even result in the IRS rejecting your return altogether. Before submitting, meticulously double-check all identifying information for yourself, your spouse (if applicable), and any dependents you are claiming. Pay particular attention to Social Security numbers and names, ensuring they match official documents precisely.

2. Math Mistakes: The Devil is in the Decimals

Despite the prevalence of tax software, math errors remain one of the most common errors on tax returns. A simple miscalculation can significantly impact your refund or, conversely, result in you owing more taxes than you initially anticipated.

"A misplaced decimal point or an extra zero can drastically affect your refund or result in you owing more taxes than necessary," Delia warns.

While tax software can help catch some of these errors automatically by handling the calculations for you, it’s still advisable to manually review your calculations before submitting, particularly if you’re preparing your return without professional assistance. Double-check your addition, subtraction, and any percentages you’ve calculated.

3. Choosing the Wrong Filing Status: A Costly Misstep

Selecting the correct filing status is crucial as it significantly impacts your tax return. Your filing status determines your tax bracket, eligibility for certain credits, and available deductions. For instance, some individuals mistakenly file as "Single" when they actually qualify as "Head of Household," a filing status that generally offers more favorable tax rates and larger standard deductions.

Married couples often grapple with the decision of whether to file jointly or separately. Filing jointly typically results in a lower overall tax burden due to greater access to credits and deductions. However, in some specific situations, such as when one spouse has substantial medical expenses or significant itemized deductions, filing separately might be more advantageous.

If you’re uncertain about your correct filing status, the IRS offers helpful tools like the Interactive Tax Assistant (ITA) on their website. The ITA can guide you through a series of questions to determine the most appropriate filing status for your circumstances.

4. Overestimating Deductions and Credits: A Red Flag for the IRS

Taxpayers sometimes overestimate the deductions or credits they are entitled to, which can raise red flags on their return and potentially lead to an audit. For example, some deductions, such as the student loan interest deduction, are subject to income limitations. If your income exceeds a certain threshold, you are ineligible to claim the deduction.

Similarly, claiming a home office deduction requires meeting strict criteria, including the exclusive use of the space for business purposes. Incorrectly claiming tax credits like the Earned Income Tax Credit (EITC) or the Child and Dependent Care Credit can result in penalties, interest charges, and even the inability to claim the credit in future years. In severe cases, it can trigger an IRS audit.

Carefully review the eligibility requirements for each deduction and credit you plan to claim, and ensure that you can substantiate your claim with proper documentation.

5. Incorrect Bank Account Information: A Refund Gone Astray

Direct deposit is generally the fastest and most convenient way to receive your tax refund. However, entering the wrong bank account number can lead to significant delays or, even worse, send your refund to the wrong person.

"A single wrong digit can direct your refund to a different bank account, and trust me, recovering it will be a time-consuming ordeal," Delia warns.

If the IRS detects that the bank information you provided doesn’t match their records, they might revert to mailing a paper check, which can take weeks or months to arrive. Always double-check your bank routing and account numbers before filing, especially if you have recently changed banks or accounts. It’s best to verify the information with a check or statement from your bank.

6. Forgetting to Sign the Return: A Costly Oversight

If you’re filing a paper return, forgetting to sign it is an easy but costly mistake. An unsigned return is considered invalid, meaning it won’t be processed until you correct the oversight. For joint filers, both spouses must sign the return.

"E-filing systems generally prompt you to give a digital signature, but it’s easy to overlook this step if you’re filing manually," Delia says.

Make sure all the required signatures are in place before sending your return to the IRS. If you’re filing jointly and one spouse is unavailable or unable to sign, you might need to use a power of attorney or other legal document to complete the process. Review your return carefully before submission to ensure that all required fields are completed and all necessary signatures are included.

Bonus Tips from Delia:

Delia offers two additional points to consider when finalizing your tax return:

• Filing Too Early: Resist the urge to file prematurely. Filing before you’ve received all the necessary forms, such as W-2s and 1099s, can lead to mistakes, such as omitting income reported on late-arriving 1099s. Before filing, compare your information to prior years and ensure you have all your tax documents in hand, including documentation related to any new situations or life events. This will help you avoid having to amend your return later.

• Missing Out on Deductions: While some taxpayers overestimate deductions, others miss out on legitimate tax breaks they are entitled to. Many people are eligible for deductions but either forget to claim them or aren’t certain they qualify, so they leave them out for safety’s sake. If you rush through the process or are unfamiliar with all the tax breaks available, you could end up paying more taxes than necessary. Tax software or consulting with a tax professional can help ensure you’re not missing out on potential savings.

The Bottom Line:

Whether you choose to use tax software, enlist the help of a tax professional, or stick to the traditional manual method, remember that ultimately, the responsibility for the accuracy of your tax return rests with you. Give your return a thorough "5,000-foot" overview and carefully consider all of the potential errors outlined above before submitting it. Taking the time to double-check your work can prevent costly mistakes and ensure a smoother tax filing experience.

Tax Talk is an outreach service of the Notre Dame, Saint Marys College Vivian Harrington Gray Tax Assistance Program (TAP).