10 common tax-filing mistakes to avoid
Thanks to tax preparation software, more of us are making fewer mistakes on our annual tax returns. But still, just one slip in entering information on your computer could end up costing you, either in the form of a larger tax bill or a smaller refund.
And even if a mistake, either on your computer or paper forms, doesn't cost you cash, it could delay the receipt of any refund you're expecting.
Tax changes also complicate the annual tax-filing exercise. For the 2014 tax year, reporting and filing requirements prompted by the Affordable Care Act will no doubt cause problems for taxpayers, tax professionals and the IRS.
Special tax scenarios aside, there are still plenty of ways to mess up a 1040 form. Here are 10 common mistakes that show up every tax season. As you review your tax return for filing by the final, extended Oct. 15 deadline, make sure you haven't made any of them.
1. Math miscalculations
The most common error on tax returns, year after year, is bad math. Mistakes in arithmetic or in transferring figures from one schedule to another will get you an immediate correction notice. Math mistakes also can reduce your tax refund or result in you owing more than you thought.
Using a tax software program to file your return can help reduce math errors. The built-in calculators do the work for you, adding, subtracting and inserting numbers on additional forms as needed. But you still have to make sure your initial numbers are correct. Entering $3,500 when the real figure is $5,300 makes a lot of tax difference. Getting the numbers right is crucial because you can be sure the IRS will be double-checking numerical entries against its copies of your tax statements (W-2, 1099s and the like).
When IRS examiners find a discrepancy, they'll definitely let you know and, in many cases, will correct your mistake and refigure your taxes for you. Don't give them the chance. Make sure your math entries are right.
2. Computation errors
These are cousins to the standard math mistakes. In these computation cases, taxpayers or their tax pros make mistakes in figuring such tax-return entries as taxable income, withholding and estimated tax payments.
Credits and special deductions also pose problems. Errors regularly show up, says the IRS, in figuring the earned income credit, the taxable amount of Social Security benefits or in calculating the larger standard deduction for taxpayers who are age 65 or older or blind. A common connection in all of these errors is added work sheets or forms before the amounts are transferred to the taxpayer's Form 1040.