10 Common Mistakes and Myths About Filing Personal Taxes
Personal filing mistakes often cause common tax problems. You may not be able to afford the services of an accountant in filing your tax returns. However, you must ensure you do it accurately when you file them yourself.
All taxpayers are liable for the mistakes on their tax returns, so avoiding common mistakes will save you from endless issues. Here, we show you ten common mistakes in filing income tax returns. We also debunk several myths and show you how to avoid common tax filing mistakes.
10 Common Personal Tax Filing Mistakes
The worst tax mistakes can cost you money or result in an audit from the Internal Revenue Service (IRS). This tax season, be sure you don't make any of these frequent blunders when filing your return.
1. Calculation Errors
Calculation error is one of taxpayers' most common tax return mistakes. As of April 7, 2022, the IRS reported 9.4 million math errors, a huge increase from 2.5 million in 2017. These errors could be as simple as subtraction, addition, or multiplication. When the IRS spots this mistake, they’ll send you a notice. However, it’s better to avoid the mistake.
How to Avoid the Mistake
You should verify the chosen number at least twice to be sure it is accurate. Also, use tax computing software to file taxes instead of paper filing. That way, the system automatically calculates the figures.
2. Incorrect Personal Details
Omitting or misspelling personal details such as names or dates of birth can affect the processing of your tax return. The name(s) and dates on the form should match those on your government records, especially your Social Security Number.
How to Avoid the Mistake
Make sure you entered your name correctly by looking it up and entering it again. If the name you bear conflicts with what's on your Social Security card, enter the name on the card. Also, if you change your name after marriage, notify the Social Security Administration immediately.
3. Failure to Disclose Total Income
As a freelancer or someone with a side hustle that brings additional income, don’t assume you don’t need to file tax returns on the extra money. As an employee, when you adjust tax withholding, some employers will pay the amount to the IRS on your behalf. However, you must disclose all your income because the IRS knows about it anyway.
How to Avoid the Mistake
Record all your additional earnings beforehand. Then obtain the relevant IRS Form 1099 and report the details. That way, you don’t owe tax interest and penalties for unreported income.
4. Incorrect Filing Status
Some taxpayers file with the wrong status, which can affect tax refunds and result in higher taxes. There are five different ways to file your taxes: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with a dependent child.
How to Avoid the Mistake
Read each filing status carefully to understand the one you qualify for. You can also use tax software that shows your eligibility and how each status differs.
5. Missing Social Security Number
Some taxpayers insert the wrong SSN or forget to include it. Your SSN is vital to tax deductions, refunds, income statements, and other credits. Excluding this information may slow down your tax return processing.
How to Avoid the Mistake
Use your card to double-check that you have written the numbers correctly.
6. Inaccurate Deposit Information
Inaccurate deposit information like routing and account numbers can increase the chances of losing your tax refunds. In such cases, the money may go back to the IRS or into someone else’ account, making retrieval difficult.
How to Avoid the Mistake
After filling out the form, read it again to ensure the account details are correct. Even when the numbers are auto-populated, check them manually.
7. Failure to Attach Vital Documents
Filing tax returns on time would often result in getting refunds early. So, there is a temptation to rush the process. However, if you do so and forget to attach vital documents, it could amount to an amendment later.
How to Avoid the Mistake
Record all your activities that may have resulted in a tax document. Before filing, collect all the documents and make a checklist. As you include the document, cross it off the checklist to ensure you’ve attached everything.
8. Exclusion of Tax Deductions
Some taxpayers forget to count tax deductions such as cash and non-cash donations when filing taxes. These charitable contributions could be profitable tax deductions, so it is important to include them.
How to Avoid the Mistake
Accurately calculate the charitable donations when filing your taxes. Also, adhere to tax rules such as donating to only qualified and tax-exempt institutions.
9. General Paper Filing Errors
Many taxpayers who still file their returns manually make simple mistakes, including failing to include their signatures. Others don’t include dates, arrange the forms wrongly or send the tax returns to the wrong office. A tax return without a signature is often considered invalid, and it will be deemed not to have been filed.
How to Avoid the Mistake
We recommend using software to calculate payroll taxes and also filing electronically. That way, your signature auto-fills, and you can check the accuracy of the forms with the system’s aid.
10. Failure to Reproduce Tax Schedules
Most taxpayers forget or refuse to make a personal copy of the signed tax returns. Having a copy helps you track filing details in case the IRS loses its copy. It also allows you to evaluate your finances and may be helpful for loan applications.
How to Avoid the Mistake
Before filing the tax return, make a copy of the signed form. You can do this electronically and/or in print.
Common Myths About Filing Personal Taxes
Below, we unbundle several myths about filing personal taxes that could save you from a tax disaster.
Myth 1: Tax Filing Extension Gives You More Time to Pay Taxes
Incorrect as it is, this is a widely held belief nonetheless. If you need more time to file your taxes, it does not mean you get more time to pay them. It only means that you are extending your filing date. This filing extension only applies to filing as the name implies, not the tax payment date.
Myth 2: Students Don’t Have to Pay Taxes
While this myth has some truth, it is not completely true. Students listed as dependents might not need to pay taxes if they earned less than $12,950 in 2022. However, consider filing tax returns if you made more than that amount. Generally, students are advised to file tax returns. This will help when you are due a refund from an employer who withheld tax.
Myth 3: You Can List Pets as Dependents
Several taxpayers have tried to claim pets as dependents and have failed. You can only claim human beings as dependents. Doing otherwise will be considered tax fraud.
Myth 4: You Don’t Have to Pay Tax From Online Earnings
This statement is completely untrue. The IRS considers all earnings the same, whether online or offline. Some companies require U.S. citizens to fill out Form W-9, but some people still escape it. Either way, the IRS requires that you disclose all your earnings and file tax returns accordingly.
Myth 5: Filing State Taxes is Not Compulsory
While it is compulsory to file federal taxes, not all states require it. However, most states require taxpayers to file state taxes and federal taxes. You can still file taxes for multiple states even if you live and work in different states. Of the 50 states, only 9 do not levy a state income tax. The nine include; Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Sometimes people ask, why was no federal income tax withheld from my paycheck?
Myth 6: The Tax Preparer is Liable for Mistakes
That is false; the taxpayer is liable for any mistakes on his tax returns. You will be responsible even if you hire an accountant to file the taxes. You are liable as long as your signature is on the tax return. However, you can seek legal redress where they fraudulently misrepresent facts or figures.
How Do I Know if I Made a Mistake on My Taxes?
The IRS often notices mistakes in taxes when taxpayers file them. An automatic system allows the agency to detect several minor errors. When the IRS spots the mistake, they will most likely email you a notification letter. The letter notifies you of the error; they may adjust it immediately.
Another way to know if you made a mistake on your taxes is to review the documents. You can either do it on your own with tax preparation software or hire a professional accountant. You’ll need to present a copy of the initial tax return so that they can carry out an effective review.
How to Do Taxes Yourself Without Mistakes
Doing your taxes yourself requires a high level of patience and dedication. The following guidelines will help you file your taxes effectively.
- Track every income your receive
- Keep records of all earnings, donations, and other taxable expenses
- Watch out for the arrival of your income documents
- Collect the necessary attachments and have them ready to send
- Educate yourself on tax deductions available for you
- Choose the right filing status
- Use a good tax filing software
- Arrange the forms correctly
- Double-check the details as many times as possible
- Watch out for the filing deadline to avoid rushing
FAQs
How many filing statuses are there to choose from?
Five filing statuses determine the taxable income rate. They include:
- Single
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er) with dependent child
Generally, taxpayers choose the filing status that gives them the lowest tax. Also, the IRS allows taxpayers to claim more than one filing status. But you need to be sure that the one you pick is the right one for you.
How long do I have to pay any tax due if I ask for an extension of time to file my return?
It is important to note that requesting an extension just buys you extra time to submit your tax paperwork. It does not give you more time to pay any tax due; the deadline remains. To avoid penalties and interest on due taxes, include proof of tax payment when requesting an extension.
What are the penalties for filing taxes with wrong information?
There are no specific penalties for filing taxes with wrong information. However, the error may result in a higher tax amount. Ultimately, it depends on the kind of wrong information.
Why is my federal refund negative?
If you have a negative federal refund, it means that you owe. So, that amount is your tax due, which means that your credits or tax withholding could not cover your income tax.
Kristen Larson is a payroll specialist with over 10 years of experience in the field. She received her Bachelor's degree in Business Administration from the University of Minnesota. Kristen has dedicated her career to helping organizations effectively manage their payroll processes with Real Check Stubs.
