Common Mistakes To Avoid During Tax Season
Tax season can be stressful, but many common mistakes are avoidable with a little preparation and attention to detail. Below are frequent errors taxpayers make, why they matter, and practical steps to prevent them.
Filing late or missing deadlines
Why it matters: Missing the due date can trigger late-filing penalties and interest on taxes owed. If you’re due a refund, delaying the filing only postpones receiving it.
How to avoid it: Mark tax deadlines on your calendar, set reminders, and file an extension if you can’t complete your return on time. Remember: an extension to file is not an extension to pay—estimate and pay any tax owed by the deadline.
Not organizing records beforehand
Why it matters: Poor organization increases the risk of missing deductible expenses, misreporting income, or misplacing important forms like W-2s and 1099s.
How to avoid it: Collect pay stubs, bank statements, investment statements, receipts for deductible expenses, and all tax forms before starting. Use a checklist to ensure nothing is overlooked.
Entering incorrect Social Security numbers or personal information
Why it matters: Incorrect SSNs or names can delay processing, cause rejects from e-file systems, or create issues with the IRS matching your return to your identity.
How to avoid it: Verify Social Security numbers and spelling against Social Security cards or official documents. Double-check dependent information and addresses.
Forgetting to report all income
Why it matters: The IRS receives copies of many income documents (W-2s, 1099s, etc.). Omitting income can trigger audits, penalties, and interest.
How to avoid it: Gather all sources of income, including freelance work, tip income, investment income, and unemployment benefits. Cross-check your records against forms you receive.
Misclassifying workers or business expenses
Why it matters: Treating an employee as an independent contractor (or vice versa) can result in payroll tax liabilities. Misreporting business expenses can raise red flags.
How to avoid it: Review the IRS guidelines for worker classification and keep clear records of business activities and receipts. When in doubt, consult a tax professional.
Overlooking deductions and credits
Why it matters: Missing credits or deductions means paying more tax than necessary.
How to avoid it: Review common deductions (mortgage interest, charitable contributions, medical expenses if they exceed the threshold) and credits (Earned Income Tax Credit, Child Tax Credit, education credits). Consider whether itemizing or taking the standard deduction yields a larger tax benefit.
Making math errors
Why it matters: Math mistakes can delay refunds and trigger notices from the IRS.
How to avoid it: Use reliable tax software, e-file when possible (which catches many calculation errors), or have a tax preparer verify your return.
Failing to e-file or sign the return
Why it matters: An unsigned paper return is considered incomplete and will not be processed.
How to avoid it: When e-filing, follow the confirmation steps. If mailing, sign and date every required signature line and include any necessary attachments.
Not keeping copies of tax returns and documents
Why it matters: You may need prior-year returns for loans, future tax preparation, or in response to IRS inquiries.
How to avoid it: Keep electronic and/or physical copies of returns and supporting documents for at least three years; longer if you have special circumstances (e.g., unreported income or property basis).
Ignoring notices from the IRS or state tax agencies
Why it matters: Notices typically require action. Ignoring them can escalate penalties or lead to enforced collection.
How to avoid it: Open all correspondence promptly. Read the notice carefully and follow the instructions or contact a tax professional to respond appropriately.
Choosing the wrong filing status
Why it matters: Filing under an incorrect status can affect tax rates, eligibility for credits, and the standard deduction amount.
How to avoid it: Review the criteria for filing statuses (Single, Married Filing Jointly, Married Filing Separately, Head of Household, Qualifying Widow(er)) and select the one that fits your situation.
Improperly claiming dependents
Why it matters: Claiming ineligible dependents can result in disallowed credits and penalties.
How to avoid it: Confirm eligibility rules, including relationship tests, residency, support tests, and tie-breaker rules when multiple parties claim the same child.
Mishandling cryptocurrency transactions
Why it matters: Crypto transactions can be taxable events. Failure to report gains or losses leads to penalties.
How to avoid it: Keep detailed records of transactions, dates, cost basis, and proceeds.
