Top Tax Mistakes to Avoid
Updated on Feb 08 2019
Research shows that over 75 percent of people make simple tax mistakes on their return that could be costing them money and time. Learn about seven common tax mistakes to avoid tax returns problem as Tax Day approaches.
Tax season is here and with it comes the stress and anticipation of filing. If you are expecting a refund, you may want to get your taxes filed as quickly as possible. If you owe taxes, you want to know how much you will need to pay by the April 15th deadline. Either way, tax season can be stressful and simple mistakes can delay your return weeks or months. Some mistakes may even require filing an amended return.
Taxes may also take a little more time this year under the new Trump Tax Plan. Review these common tax mistakes to avoid delays and penalties.
Seven Common Tax Mistakes to Avoid
Double checking your return for these seven common tax mistakes can save you time and money in the long run.
1. Incorrect personal information
While online tax preparation has made filing taxes easier than ever before, it can not fix your personal information. Double check your social security number, your name, the taxpayer’s name and all your banking information is correct. Making an error on these simple data points can be catastrophic for your tax return. It’s worth the extra minute to double check that you have entered the necessary information correctly.
2. Calculation errors
Math errors are common on tax returns that are done by hand. If preparing your tax return by hand, double check that you are using the most current tax tables and triple check all math calculations. For those using online tax preparation software, the program will handle all calculations for you, but it can not check entry error like transposing numbers or putting decimals in the wrong places. Either way you will need to check your numbers or, even better, have a professional review your calculations.
3. Forgetting to sign your return
This simple mistake happens more than you may think - especially for those filing jointly with a spouse. When filing jointly, you must both sign your return. If you are using a tax preparer or service, you still must both sign the return before sending to the IRS. Forgetting this important step can cause a massive delay and even result in a penalty for filing a late return.
4. Not claiming deductions that are age-specific
For adults over the age of 65, there is an additional standard deduction that is often overlooked. For 2018, the deduction is worth $1,300 or $1,600 if you are unmarried and not a surviving spouse.
5. Failure to file on time or request an extension
The tax filing deadline is April 15, 2019 except for the states of Maine and Massachusetts because the 15th of April is a holiday in those states. If you are unable to meet the April 15 filing deadline, you may file for an extension that gives you until October 15, 2019. An extension is only for filing paperwork, not for late payment. Even if you file an extension, you are still required to pay by April 15th.
6. Not meeting required minimum distributions (RMDs)
Taxpayers over the age of 70.5 are required to take distributions from formal retirement plans. The amount you must take depends on your age and the account balance at the previous years end. Every year you age, you are required to withdraw a higher percentage. If you don’t take the required amount you can be fined for up to 50 percent of the amount you were supposed to take.
7. Not withholding tax on pensions and Social Security income
Don’t forget that many forms of retirement income are taxable including pension income and Social Security income. If you do not have the right amount in taxes withheld from your retirement accounts you may be surprised by what you owe in taxes.
If you have questions about filing taxes and want to ensure it’s being done the right way, maximizing your returns and avoiding an IRS audit, contact your fiduciary financial advisor. He or she can help you file correctly and efficiently, avoiding these common mistakes that can lead to delays and fines.
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