Any mistake on a tax return equals money, hard-end money. Either you are losing it by paying taxes, interest, and penalties or getting a fat refund. In addition to the former, you may face record interrogation from an IRS auditor.
The best bet is to avoid these errors altogether. Here are some and how to avoid them.
Not everyone is good at calculations. Some may find it challenging to do the arithmetic or transcription when playing with numbers in tax return Schedules. The IRS will message you once they observe the error. The error affects your tax refund and increases your tax bill. It turns out you have to spend extra money.
However, you can seek help from tax software programs while confirming. There are also tax professionals ready to help. And remember to have your copy of the tax return dating back seven years.
This error is failing to itemize the proper column, taking the wrong credits or deductions, or making wrong entries like taxable income, estimated tax payment, or withholding. The IRS will, as always, send you a correction notice either to alert you of the deduction in your refund or extra taxes.
In addition, the IRS will add penalties and interest if you miss the deadline to remit your owed taxes and correction. However, you can jump the hurdle using the approved tax software, hire a professional, or be current with tax date tables and forms.
The name on your tax return must be the same as what you have on your Social Security number. This error is popular among newly wedded couples and sometimes people with name changes who forget to update the Social Security office.
Such an error will withhold your tax return. However, you can avoid the mistake by using the name on the card or correcting your name with the Social Security Administration. Also, you can consider populating last year's tax return information if it's correct.
Taxpayers with multiple tax refund accounts easily fall into this category. The impact could cost you your refund to another taxpayer or the IRS, and there is no way of getting it back. The fastest way to circumvent this error is to ensure the account, routing numbers, and auto-populated numbers are correct.
Another widespread mistake is filing the incorrect or missing social security number. The error increased when the IRS banned using a SSN on tax packages to encourage privacy. Some taxpayers who used the old system must remember to fill it in. This is vital for transactions like income statements, credits, or deductions. The error will slow your tax return process or exempt it from processing. You can avoid it by inputting your SSN before filing the returns and ensuring to confirm the SSN, especially if you have a spouse and children.
These sections, in the form of cash, donation, and others, are essential in tax deduction and sometimes not claimed. Sometimes they get miscalculated, and non-cash contributions are claimed through the market value and must be in the best condition to avoid subtraction from your tax refund, and missing the tax deadline leads to penalty and interest. To prevent the error is simple, use tax software for auto-filling signatures, hire an expert, or ensure your returns are accurate and complete before mailing or e-filing.
These are some popular errors you can avoid to get your full refund and avoid tax penalties and interest. Ensure you avoid mistakes to prevent extra work that mostly leads to lost money.
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Jim McClaflin, EA, NTPI Fellow, CTRC