Filing your taxes is very important, since you always want to maintain the legality of your business. The downside is that due to either rushing or a lack of knowledge, it can be very easy to make some tax mistakes. That’s the reason why you want to narrow down the main tax mistakes people make, so it’s easier to understand what issues can arise and what you need to do in order to avoid them.
Math Errors
Math errors are usually the most common tax mistakes. The IRS finds millions of math errors every year, so this is certainly something usual that can appear. These errors can be minor, like multiplication, division, subtraction or addition mistakes. But there are also more complex errors like adding the wrong numbers in a schedule or tax table.
Even if the IRS will catch on to these mistakes and send you a notice, it’s imperative to try and avoid these mistakes as much as possible. The problem is that if you have such mistakes in your tax returns, it can take a while to process everything. Ideally, you want to use professional tax software to ensure you avoid any errors. It also helps streamline the tax returns, while also saving you time.
Also, you can go through all the calculations manually before sending any documents to the IRS. Sure, it can be time consuming, but you will end up waiting much more time if there are any tax errors. Try to tackle that issue early on, and always double or triple check all your taxes.
Paper Filing Blunders
There are a lot of people that do various paper filing blunders. These aren’t that problematic, but they do end up prolonging the tax return process, and that alone comes with its challenges. These issues can range from not signing and dating the return to not having enough postage on the envelope. Other issues include arranging tax forms improperly, not including some of the forms or sending the tax returns to the wrong office.
While it can be simple to avoid these mistakes, they do appear from time to time. Ideally you want to double-check everything and ensure that you don’t have to deal with any audit or problems that appear. Just to put it into perspective, the error rate for paper returns is 21%, whereas e-filing returns just have a 1% error rate. It makes a lot of sense to file your returns digitally in order to avoid many of these tax mistakes shown here.
Adding the Wrong Account or Routing Number
You will find situations where people added the wrong bank account or routing number. Obviously, if you are waiting for a tax refund, you do want to be certain that the account number is correct. Otherwise, the IRS will try to verify the account and routing numbers. But there were situations where tax refunds were added to the wrong account because the person didn’t write it properly.
In most situations, the IRS will send a paper check instead of a deposit. Yet you can’t rely on that all the time, so it makes a lot of sense to check all the accounts manually before filing anything. Someone else might receive the tax refund instead of you in case you added the wrong account, so check it multiple times before filing any tax returns.
You Forgot Important Paperwork
A lack of paperwork can be one of those tax mistakes people encounter often too. The problem here is that you’re always in a rush to avoid sending these returns after the deadline. When you’re rushing, it’s common to forget important paperwork. And if that’s the case, it will prolong the processing time, which is something to keep in mind. If you send all the documents, you will receive your returns early, any delay will lead to problems down the line.
Use an online paystub generator to ensure that you have access to all the necessary documents. Also, create a roundup with all the documents that you need to file, and see if you have them there. If not, you will have to add every document accordingly. Checking manually is the best way to ensure everything is filed correctly. Digital apps can also help, and you also want to check if you attached all the documents properly.
Under-Reporting your Income
Obviously, you will need to report all your income, not just some of it. If the IRS sees any discrepancies between your earnings, they will start an audit. Keep in mind that you do want to include documents for all tax deductions, be it donations, travels, meals and so on. Documenting all the expenses is very helpful because you will not have any problems with the IRS.
However, if you’re under-reporting your income, that can lead to a variety of problems down the line. Keeping a good record of all deductions and tracking the necessary documents can help you prevent an audit. Any discrepancies can bring penalties from the IRS, so that’s the last thing that you want to tackle.
If you donate often, you also want to keep those receipts and deduct the amount from your taxes. Sometimes you write the right amount, but you’re under-reporting your income due to not taking all deductions into consideration. Those mistakes might seem minor, but they can bring an audit and that alone is always going to have its fair share of concerns.
Unwanted Typos
Typos are a problem because they can lead to improper data and a possible audit. These tax mistakes are more common than you might expect. When it comes to filing taxes, even a single typo can end up being problematic. In fact, you can end up paying a lot more due to transposing a number or adding another 0. The main focus is to try and check all information and see if there are any typos.
You also want to let the IRS know how to handle the refund, as otherwise it will take time for them to contact you and settle for an agreement. There are other issues too, like ending up crediting your payment to someone else. As we said earlier, mistakes appear at times, so double-checking is always a priority. You can end up paying for the wrong account if you’re not careful, and the problems can be very serious.
Conclusion
The IRS recommends everyone to hold tax return documents anywhere from 3 to 7 years depending on the situation. It’s a good idea to create a record with all the documents, as you never know when a potential audit can arise. The truth is that most of the time, tax mistakes can be avoided with due diligence and proper checkups before sending. Yet issues still arise, so having the right way to store and manage documents is a priority.
Whether it’s an inaccurate social security number, adding another number by mistake, using the wrong sign or not signing the documents, these are issues that do appear at times. What you want to do is to address these concerns and check every document manually to prevent problems. Not only will you receive any tax refund faster, but it will also lower the chances of dealing with a potential audit down the line.