Don’t squander your tax refund by making mistakes. Learn about the most common tax mistakes and how to avoid them.
Taxes can be complicated, but the most common tax mistakes are usually straightforward.
Don’t be alarmed, but you only have a little more than a week to file your income taxes. Your tax return for 2021 is due next Monday, April 18.
Taxes are stressful, especially when there is a deadline approaching. However, don’t rush through your return; careless errors can have a significant impact on your tax refund or cause it to be delayed for several months.
To ensure that you receive your correct tax refund on time and in full, double-check our list of common tax return errors below. If you receive a tax return rejection notice due to an error and have filed your taxes on time, don’t be alarmed; you have five days to correct the information and refile.
Mistake No.1: The first blunder is failing to file your tax return on time.
According to the IRS, approximately 20% of taxpayers wait until the week before the deadline to file their tax returns. If you owe the IRS money, that’s not necessarily a bad strategy, but if you’re expecting a refund, you’re playing with fire.
Procrastinating on your taxes leaves little room for error, and failing to file your return on time will undoubtedly complicate the status of your tax refund. If you owe money to the IRS, you must pay a late filing fee, and other penalties will begin to accrue.
It is free to file a six-month tax extension until Oct. 18, but you will have to pay estimated taxes owed and will lose money if you expect a refund.
Mistake No. 2: Spelling names incorrectly or entering the incorrect Social Security number
This error may appear absurd, but it is more common than you might think. Enter your full name exactly as it appears on your Social Security card, as well as your Social Security number. Your tax return will be rejected if either is not exactly the same.
If your legal name has changed, you must first contact the Social Security Administration to update it before filing your taxes under your new name.
Mistake No.3: Entering the incorrect AGI
When you file your tax return electronically, the IRS uses your prior year’s adjusted gross income, or AGI, to verify your identity. That means you’ll need the exact AGI from your 2020 tax return in order to file your 2021 taxes online. If your AGI does not match that of the previous year, your tax return will be rejected, and you will have to file again.
If you misplaced your tax return from the previous year, you can look up your AGI for 2020 by requesting an instant transcript on the IRS website, though you must first create a free online IRS account. If you filed a 2020 tax return that has yet to be processed by the IRS, enter $0 for your 2020 AGI when filing this year’s return. If you didn’t file a tax return in 2020 but used the nonfiler tool to claim stimulus or child tax credit payments last year, enter $1 as your 2020 AGI.
Mistake No. 4: Filing under the incorrect filing status US taxpayers can file their tax returns as Single, Married Filing Jointly, Married
Filing Separately, Head of Household, or Qualifying Widow(er) with Dependent Child. Your filing status determines your standard deduction, tax credit eligibility, and overall tax burden.
The IRS’s What Is My Filing Status? tool will assist you in determining your own situation and making the appropriate choice. If your filing status is incorrect, you must file an amended return using Form 1040-X. In the worst-case scenario, the IRS may suspect tax evasion and conduct an investigation.
Mistake No. 5: Calculation errors with a piggy bank and a calculator.
Don’t let arithmetic errors hold you back.
The worksheets and rules for many tax items, such as the child tax credit, earned income tax credit, mortgage interest deduction, and child care deduction, can be difficult to calculate on your own. A mistyped number or incorrect calculation can result in an inaccurate tax refund, which means you’ll either lose money or have to pay an overage with fees and penalties.
Quality tax software will almost completely eliminate these types of mistakes by collecting and calculating all of the numbers required to file your taxes correctly. All of the top tax products provide accuracy guarantees that will cover any losses or penalties incurred as a result of software calculation errors. In order for tax software to work properly, you must still enter correct information, so double-check all of your numbers before filing.
If you’d rather do your taxes the old-fashioned way, the IRS’ Interactive Tax Assistant can assist you with a variety of credit and deduction calculations.
Mistake No. 6: Incorrect information on the child tax credit and stimulus payments.
If you received monthly advance child tax credit payments or the third stimulus check last year, you must report the total amounts on your 2021 tax return. If you fail to include that information or enter the amounts incorrectly, the IRS says it will “need to further review the tax return, resulting in an extensive delay.”
Earlier in the year, the IRS sent letters to taxpayers containing the total amounts – Letter 6475 for your stimulus check (or economic impact payment) and Letter 6419 for your child tax credit payments. If you didn’t receive those letters or inadvertently threw them away, you can look up the information using an online IRS account.
According to IRS Commissioner Charles P. Rettig’s testimony before the House Ways and Means Committee, the IRS “received far more than 10 million returns” last year where taxpayers made mistakes reporting stimulus payments. These returns necessitate manual reviews, which can result in lengthy delays.
Mistake No.7: File electronically with direct deposit
According to the IRS, if you file electronically with direct deposit, you will receive your refund in about 21 days. It will not, however, work if you enter the incorrect bank account or routing numbers when filing your tax return. It’s too late to change your banking information once the IRS has accepted your return.
If the IRS is unable to deposit your refund electronically into your bank account, it will send you a paper check to the mailing address listed on your tax return, which will take six to eight weeks, though you can set up postal alerts to know when it will arrive.
If you enter valid account and routing numbers that aren’t yours on your tax return, the IRS may deposit your tax refund into someone else’s bank account. In that case, you’ll need to contact the bank and, more than likely, visit a branch in person to prove your identity and explain the situation with documentation. After you get the money back from the bank, you’ll get a paper check in the mail from the IRS.
Mistake No.8: Tax returns that are not signed
Filing a paper tax return will significantly delay your tax refund. Filing it without a signature will result in the IRS rejecting your return and requiring you to file it again, which will significantly slow down the process.
Both partners must sign the tax return if you are married and filing jointly. There are exceptions for active military members serving overseas and others who require the assistance of a third party with power of attorney.
You’ll never have to worry about this mistake again if you file electronically and sign your return digitally.