Seven Tax Return Mistakes that Will Cost You
The following article is presented for informational purposes only. If you have tax questions, please consult with a qualified tax professional.
Tax season is back again. If you’re expecting a refund this year, the last thing you want to do is make a mistake that costs you money. Sometimes that means an error that causes a delay in receiving your refund. Sometimes that means an oversight that results in you not getting the full amount owed to you.
So as you prepare to complete your tax return, do your best to avoid making the following common mistakes.
Simple spelling or mathematical errors
You want to make sure that whatever names listed on your tax return match the tax identification record maintained by the Social Security Administration. If you’ve recently married or changed names, you want to make sure you’re using the name associated with your tax ID in order to avoid processing issues.
At that same token, errors in your math can cause returns to be held for review, causing a delay in your refund. Double check your math before you send!
Picking the wrong filing status
For most people, selecting your filing status is one of the simpler elements to completing a tax return. But where there’s a little gray area (couples filing separately, anyone in the midst of a divorce, etc.) it’s best to understand the consequences of each choice.
Finding the best status for your situation can make a sizable difference in your refund. Consider speaking with a qualified professional to help you decide which filing status is right for you.
Forgetting to include additional sources of income
Failing to report income from secondary jobs or investment accounts can be costly, including potential penalties and interest on that unreported income. The IRS knows how much you made. Be sure to include all forms of income when completing your return.
Failing to properly document your charitable giving
Charitable giving is great way to do something positive in your community and potentially reduce a bit of your taxable income. For tax purposes, at least, charitable giving won’t help if you 1) don’t remember how much you gave, and 2) don’t have any documentation of your giving.
Any small donation (under $250) requires at least a receipt from the recipient (unless a receipt isn’t obtainable), if you’d like to claim it on your income taxes. Large donations ($250 and up) require even more documentation, which you can find over on the IRS website.
Not itemizing your deductions
In many cases, the standard deduction is just fine. But quite a few people avoid itemizing their deductions to their detriment. Take the time sort through all of your applicable deductions, especially if you had substantial medical or education-related fees the previous year. You can also deduct state and local taxes, which can make a big difference, especially if you live in an area with higher than average income tax rates.
Not taking advantage of available credits and tax breaks
There are some big tax credits out there, and you might be surprised to find that you actually qualify for one. The Earned Income Tax Credit, for example, is typically only claimed by about 20 percent of the eligible consumers. Check out this list from CNBC of the ten most popular tax credits to see if there’s one you may qualify for.
Neglecting to amend old tax returns
You’re allowed to amend prior tax returns for up to three years. If you discover, for instance, that you’ve been eligible for a certain credit all these years, you can submit an amended return and receive any additional refund owed to you. Don’t think that just because the return is out the door, that you can’t claim money that’s owed to you.
Updated February 2020