8 Tax Filing Mistakes to Avoid This Year
Filing taxes can be overwhelming, and sometimes, we overlook important things in the chaos. Let’s review common pitfalls taxpayers encounter and suggest some proactive measures you can take to avoid making the same mistakes. Not only should this give you a smoother tax filing experience, but it could also save you money.
1. Filing late or forgetting to file.
If you must file an income tax return, be sure to file it on time to avoid a penalty for filing late. There can be serious consequences if you don’t file taxes. If you are missing important tax information when your return is due, file for an extension. Alternatively, you can also file a return with the best information you have and amend it later if necessary.
Even if you have tax due that you cannot pay immediately, file your return anyway. The IRS imposes separate penalties for filing late and paying late, so it’s better to at least file your return on time.
If you’re not required to file, it’s a good idea to prepare a return anyway. You may be entitled to money back from the government through various refundable tax credits and other tax benefits, which you can only claim if you file a return.
2. Not contributing to a retirement plan.
It’s not too late to contribute to some retirement plans. You have until Tax Day, April 15, 2024, to make contributions of up to $6,500 to an IRA (or combination of traditional and Roth IRAs) for the 2023 tax year.
If you are 50 or older by the end of 2023, you can contribute up to $7,500 to your IRA(s).
3. Forgetting about income for which you received a Form 1099.
You may receive Form 1099-NEC for freelance work you performed or Form 1099-S for proceeds from the sale of real estate transactions. It’s essential to report all the income you earned throughout the year on your return, regardless of the source.
The IRS also receives copies of the 1099 forms sent to you. And while the agency may not notice immediately if you make a mistake and don’t report income for which you received a Form 1099, they will eventually. If it appears you did not report all your income, you’ll get a notice from the IRS with a balance due.
4. Inflating the value of charitable contributions.
Making noncash contributions to a charity can be a smart move. It helps the charity, plus you generally can claim a deduction for the item’s value.
What’s not a smart move — taking a larger deduction for your contribution than you should. That mistake may cause the IRS to disallow part of your deduction. As a result, you could owe additional tax plus interest and penalties. The resulting penalty can be significant if you were substantially off in your estimate. Always be sure to report contributions as accurately as possible.
5. Mismatched names and Social Security numbers.
Before you file your return this tax season, review the names and Social Security numbers for you, your spouse, and the dependents you claim for various credits and benefits. Make sure each name is spelled exactly the same as it is on the Social Security card or other official identifying documents. Even a simple typo in a name or SSN can cause significant delays and headaches down the road, so it’s good practice to triple-check names and numbers for accuracy before submitting your return.
6. Direct deposit account number errors.
Another good number to triple-check is the bank account number where you want the IRS to send your tax refund. If even one digit is off, someone else could get your tax refund, or it could be sent back to the IRS.
7. Not using the most advantageous filing status.
Sometimes, using a certain filing status can save you money. For example, if you’re married and don’t have a reason to file separately, you’ll often pay less total tax by filing jointly. If you are single and have at least one dependent, you’ll likely do better filing as head of household than as single, assuming you meet the qualifications.
TaxAct® can lead you through filing status qualifications and help you select the best one for your situation.
8. Not using your 2023 tax return to help plan for 2024.
As you file this year, note any changes you can make this year to help you save money during next year’s tax season. Was there a tax credit or tax deduction you missed out on this year that you could take steps to qualify for in 2024? Can you adjust your withholdings even further using our Refund Booster1 to get the refund amount you desire? Use your 2023 return to plan your best 2024 tax year possible.
Article provided by TaxAct
1Refund Booster may not work for everyone or in all circumstances and by itself doesn’t constitute legal or tax advice. Your personal tax situation may vary.
This article is for informational purposes only and not legal or financial advice.
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