As tax season approaches people start getting stressed about filing their tax returns. One sure way to draw the attention of the Internal Revenue Service is making a mistake on your return, here are seven of the simplest mistakes people make so you can avoid some extra stress this year.
1. Forgetting to sign and date your return. This is so common, the IRS even posted a video on You Tube, with sign language, to remind people to sign and date their returns.
2. Math errors. The frequency of math errors has gone down recently as more people are using software or professional return preparers, but simple addition and subtraction errors are still an easy mistake you need to avoid. Double check any manual math before sending in your return.
3. Wrong social security numbers for you, your spouse or your dependents. A sure way to get a letter from the IRS is to put an incorrect social security number on your return. Their computers automatically match names and social security numbers for every return.
4. Not matching information returns to your personal tax return. You know all the information returns you get in January and February like W-2’s, 1099’s and 1098’s, well the IRS gets a copy of those also and they match up your return with their copy. Sometimes you may have a legitimate reason why amounts on a 1099 will not agree with your return, but a W-2 should always match what you report. If you get an information return that is not correct, contact the person who sent it and have them send you a corrected copy.
5. Mixing up deductions and credits. Deductions are used to calculate how much of your income is taxed, whereas credits are dollar for dollar reductions in your tax liability. Use a bookkeeping application like Outright.com for your business to record everything accurately.
6. Putting the wrong bank account information on your return. If you are getting a refund, the IRS allows you to choose to have your money direct deposited into your checking or savings account. All those little electronic looking numbers at the bottom of your check are how the IRS knows where to send your money through the banking system. When you put those numbers at the bottom of your return, you can be off one number and that refund will not find its way into your account.
7. Failing to file electronically. Electronic filing was first introduced in 1990 and turns 20 this year. When you file a return manually, most of the information has to be scanned or manually keyed in by an IRS employee. In their own studies the IRS found that they themselves made mistakes on 20 percent of the returns that were processed manually compared to under 1% on electronically filed returns.
In 2009, the service brought in an additional $48.9 billion from collection, audit and return matching efforts. Check your return for some of these common mistakes and it will help you avoid additional scrutiny from the IRS.
Outright.com is the free financial management tool for small business owners and the self-employed that simplifies and de-stresses tax time for these workers.Subscribe to the Podcast