Some mistakes are inevitable in life and few are necessary, but one place you should try your to avoid them is in your tax return. One honest or teeny tiny error in your tax paperwork can become a nightmare. Your tax return and refunds could be held up indefinitely, i.e. weeks or months. In worst case scenarios, you may get charged with penalties or pay an interest for correction of your blunders. Tax rules might seem complicated, though most of the common mistakes are rather simplistic. Few slipups can be perceived as tax fraud, so beware.
Tax Attorneys in Fairfield, NJ, mention the top 10 mistakes frequently observed in tax papers and filing:
1. Not filing by the deadline
If you fail to file your taxes in time, there will be consequences. The IRS won’t take any harsh action against you, and you have the option to apply for an extension, which gives you more time. If you don’t submit a request, you will automatically get charged with a 5% penalty on the amount payable for each late month. If you have been granted an extension, you still owe an interest on taxes paid past the deadline. The IRS will still charge a late fee of 0.5% per month on pending tax.
2. Mathematical Errors
Mathematical formulas used in tax forms can be confusing, especially for those who aren’t even good with simple math. It’s crucial to double-check the data you’ve entered, as well as computations you’ve made. Arithmetic inaccuracies often result in fines, and possibly an audit. Using software or online applications designed for tax calculations can help reduce such errors.
3. Filing under Wrong Status
The IRS applies different income tax rates and standard deductions with respect to your filing status. For example, you can file as a single individual, as head of a household, or jointly with your spouse. Married couples receive double the standard reduction for filing together. You may choose to file separately from your spouse, but you can only claim standard or itemized deductions in that manner.
4. Messing up the Social Security number
Social Security numbers are used by the IRS to compare the data provided by you with information it receives from employers, banks, and other institutions. If you alter or miss a digit in your Social Security number, the IRS may reject your return. Therefore, make sure you enter each digit precisely as printed upon your Social Security card, and recheck.
5. Providing an incorrect account number
In case you qualify for a tax return, it is best to have it transferred directly into your personal bank account; you may provide your checking account info, but a savings account is also good. This way the amount will be deposited quickly and effortlessly into your account. Do not forget to double-check the routing and account numbers on your tax forms because such a misstep can cause irreversible damage. You may never receive your your refund, but someone else might.
6. Excluding supplementary income
Having multiple sources of income complicates your tax situation. This includes working an extra job as an independent contractor or employee, individual remote work, or passive income/interest money from savings and investments. Ensure that each of your employers provide you with documentation that issues details of your earnings, since a copy has to be sent to the IRS. Any additional income that remains unreported will be penalized, so you will need to pay a fine or interest.
7. Omitting your Signature
If you submit tax returns without your signature, the IRS will consider it invalid. The IRS shall not issue a penalty for missing the filing deadline due to a missing signature, given that everything else was completed correctly. However, you will be required to reply with a signed copy to reinstate the process. Your spouse’s signature must also be provided in case you are filing jointly. Last but not least, anybody you paid to prepare the tax paperwork must sign it and supply their IRS Preparer Tax Identification Number.
8. Saving on Stamps
If you were trying to save some pennies by using one stamp instead of two on the envelope enclosing your tax papers, I have bad news for you. Believe it or not, the USPS will return your consignment. This will further delay your tax returns and cost you a lot more in interest and penalties; the 55 cents you were saving by skimping on stamps won’t be worth it. You can elude this adversity by e-filing or at the very least checking with the Postal Service first about postage requirements.
9. Overlooking a Tax Break
The IRS may not have a reputation of being kind and charitable, though it does offer a variety of tax credits and exemptions, particularly for families and students. Do not miss out on incentives like the Child Tax Credit, which can reduce your tax payment by up to $2,000 if you qualify. Explore all your options before opting for the standard deduction. It is highly recommended for real estate owners to itemize their greatest deductions to determine a potential tax break.
10. Misspelling or using an invalid Name
An error of this kind is likely to happen if you fill forms in a hurry and don’t bother to recheck or review afterwards. This is also a common mistake if you don’t use your registered legal name on a daily basis. You may use a different first, middle, or last name for day-to-day interactions, and apply it to your tax returns out of habit. This is problematic since the name on any refund check from IRS will be spelt exactly as it appears on your tax return; as a result, your bank may raise an alarm. Therefore, it is important to spell all names exactly as they appear on your Social Security cards. In case you have legally changed your name, do inform the SSA straightaway.
