What to watch out for and how to stay on track.
Whether you’re filing a simple return or navigating more complex deductions and income sources, it’s easy to make costly tax mistakes. Many taxpayers unintentionally overpay, underreport, or set themselves up for IRS scrutiny by overlooking important details. Here are some of the most common tax errors—and how to avoid them.
1. Filing Too Late or Not at All
Missing the tax filing deadline is one of the most basic but costly mistakes. Even if you can’t pay what you owe, filing on time helps avoid the failure-to-file penalty, which can be substantially higher than the failure-to-pay penalty. Late filings without extensions can also delay any refund you might be owed and can attract unnecessary attention from the IRS. If you won’t be ready by April’s deadline, file for an extension early—but remember, the extension gives you more time to file, not more time to pay.
2. Errors in Personal Information
Mistakes in basic personal information like your Social Security number, name spelling, or filing status are surprisingly common. Such errors can delay refunds or even lead to audits. For married couples, using the correct filing status (e.g., “Married Filing Jointly” vs. “Married Filing Separately”) is crucial. Ensure that every dependent listed matches IRS records exactly, especially if divorced parents are claiming the same child.
3. Incorrect Bank Account Information
Many people prefer direct deposit for their tax refunds because it’s faster and safer. But mistyping your bank routing or account number can result in your refund being sent to the wrong address, or lost altogether. Triple-check those digits before submitting your return.
4. Underreporting Income
Forgetting to include income from freelance gigs, investments, or side jobs is another frequent error. The IRS receives copies of your 1099s, W-2s, and other income forms, so discrepancies between what you report and what they see can trigger audits or fines. Even small side income from apps like Venmo or PayPal (now increasingly monitored) needs to be reported.
5. Overlooking Deductions and Credits
Taxpayers often miss valuable deductions and credits simply because they don’t know they exist or don’t keep proper records. For example, the Earned Income Tax Credit (EITC), education credits, or student loan interest deductions can significantly lower your tax bill—but only if you know to claim them. Similarly, self-employed individuals might miss deductions for home office use, business mileage, or software costs.
6. Math Mistakes
While software and online filing platforms help, errors still occur, particularly when people file manually. Miscalculations can result in underpayment (which might lead to interest and penalties) or overpayment (leaving your money with the IRS unnecessarily). Even using outdated tax tables can lead to incorrect figures.
7. Failing to Sign and Date Your Return
This is one of the simplest errors, and it can completely void your return. Whether filing digitally or by mail, an unsigned tax return is considered incomplete. If filing jointly, both spouses must sign.
Tips to Avoid Tax Mistakes
- Start early. Give yourself plenty of time to gather documents, review forms, and seek help if needed.
- Use reputable tax software or hire a professional, especially if you have a complicated return. Many software programs include error-checking tools.
- Keep detailed records of all income and expenses throughout the year.
- Double-check everything, especially Social Security numbers, bank account info, and math calculations.
- Stay informed. Tax laws change frequently, and what applied last year may no longer be relevant.
Filing taxes can be overwhelming, but avoiding common mistakes can save you money, stress, and potential legal issues. When in doubt, don’t hesitate to consult a tax professional—it’s often more affordable than you think and could save you more than it costs.