6 mistakes to avoid while filing for tax returns
The Internal Revenue Service (IRS) suggests people file tax returns electronically for faster refunds. Electronically filing has many benefits. The software prompts taxpayers in case of missing information, calculates the amount, highlights errors, and makes the credit claiming and deduction process easier. However, the process may lead taxpayers to make silly errors that can delay their returns and affect savings. The following errors can be easily avoided while filing a tax return.
Approximately 20% of taxpayers, according to the IRS, put off filing their tax returns until a week before the due date. Taxpayers are more likely to make mistakes if they file their forms closer to the IRS deadline. Those expecting a refund may end up losing out on money. Alternatively, for those who owe money to the IRS, failing to file tax returns on time may result in a late filing charge or accruing penalties.
Inaccurate SSN and misspelled names
One’s name and Social Security number (SSN) must be written on the tax return precisely as they appear on one’s Social Security card. Even a minor error can lead to one’s tax return getting rejected. In case one’s legal name changes, it is advised to promptly update the same with the Social Security Administration before tax filing.
Incorrect status or information
One’s tax liability, deductions, and credit eligibility are all based on one’s status. The filing status can vary from single to married and filing jointly or separately to a qualified widower with dependent children. Taxpayers having difficulty determining their status can use the Interactive Tax Assistant on the IRS website. Additionally, spousal and dependency exemptions require additional information. For example, the spousal exemption requires both partners to disclose their ages and gross incomes. In case of dependents, the IRS needs the support amount and relationship between the taxpayer and the dependent. An inaccurate status or information could necessitate filing an amended return or be considered tax fraud.
The most frequent filing errors are those involving credits and deductions, such as earned income tax credits, mortgage interest deductions, and child care deductions. Taxpayers are urged to use automated software to calculate a variety of their taxes since the software removes all calculation errors and flags any inconsistencies. Even a single-digit miscalculation might result in an erroneous tax refund, the potential loss of money, or the payment of fees.
Incorrect bank account numbers
One can opt for direct deposit through electronic filing and expect to receive a refund within 21 days. But entering incorrect bank details could cause unnecessary delays or result in the IRS sending one’s refund money into someone else’s bank account. Once the IRS has accepted the return, it is difficult to modify the bank information. To rectify the error, one may have to visit the bank, explain one’s situation, and prove one’s identity along with supporting documents, which can lead to a time and money loss.
Unsigned tax returns
A tax return form that is not duly signed is considered invalid. For joint filing, both parties must sign the document. Similarly, military members stationed abroad need to use a third party with power of attorney. Any discrepancies in the signage can result in the IRS rejecting the return. One can prevent these common tax filing and return errors by employing a trustworthy and experienced tax export, certified public accountant, or an agent.
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