Tax time’s right around the corner and it’s time to get your records in order and make those year-end appointments with your accountant (or order your favorite tax software.) Accuracy is key, no matter how you do your taxes, because even your accountant has to rely on the information you give them. Here are some of the most common mistakes people make when filing their taxes. You can avoid a lot of stress and headaches by being careful with these.
- Wrong Name(s)
Remember how you’d get points for just entering your name correctly on the SAT? The same goes for your tax return: make sure your name and your spouse’s name have been entered correctly. Accidentally misplacing, adding, or omitting a letter in your name can result in significant delays in processing your tax return.
If you recently changed your name due to marriage, divorce, or other legal name change, you need to report these changes to the Social Security Administration so that your Social Security number is updated. This way, when the IRS matches your Social Security number to your name, there won’t be delays.
- Incorrect Filing Status
Your filing status is what determines your eligibility for most tax benefits. For many people, it isn’t that hard to figure out the correct filing status to use. However, single parents frequently make the mistake of filing as Single, when they are supposed to use Head of Household to get the benefits it carries. If you are unmarried and caring for an aging parent, you are also likely to be Head of Household and not Single. Conversely, if your divorce didn’t finalize yet, and you don’t have any eligible children or parents who could be your dependent, then you’re supposed to use Married Filing Separately and not Single.
Using the wrong filing status can either cause you to lose out on thousands of dollars in benefits you are legally entitled to, or put you in hot water for accidentally claiming benefits that don’t apply to your filing status.
- Incorrect Social Security Number
Just like with your name, input errors with your Social Security number can set off the IRS’s matching program and cause a lot of headaches. Your tax software will automatically populate Social Security number fields once you enter it, so make sure it’s entered correctly.
- Ineligible Dependents
Contrary to popular belief, someone doesn’t have to be your child who lives with you in order to be claimed as your dependent. For tax benefits like the Earned Income Tax Credit and medical expense deductions, certain people also don’t have to be claimed as your dependent in order to use their expenses for these benefits. There are two categories of dependents: qualifying child and qualifying relative. It is possible to have multiple qualifying relative dependents based on their income, residency, and relationship to you. IRS Publication 17 has a full breakdown of who is an eligible dependent.
Regardless of category and relationship, your dependents must have valid Social Security numbers. After the IRS started requiring Social Security numbers in 1992, millions of dependents disappeared from their database (likely back into their dog beds and cat carriers.) However, you might accidentally claim your college-age child who doesn’t meet the residency test, or your significant other who you financially support but who earns more than the income limit. Make sure they meet all the criteria outlined in Publication 17.
- Failure to Report Miscellaneous Income
With certain exceptions, almost everything you earn is taxable income. This includes side hustles, freelancing, prizes, and finding money in the street.
While the IRS isn’t likely to know about that $5 bill you found in the street, nor enforce any action against you for not including it on your tax return, if you received a 1099 form because you drove for Uber or had a lot of sales through PayPal, then Uncle Sam also got a copy. If the IRS’ matching program detects that you haven’t reported your income from all of the 1099s payers have filed on your behalf, it’s going to cause a problem. Just because the money isn’t reported on a W-2 that you receive for your job doesn’t mean you don’t have to report it and pay taxes.
Most of these tax filing mistakes are simple and easy to catch when checking over your tax return. Always carefully check the numbers that go on your return, whether they’re copied or there was math involved, and make sure all names are also spelled correctly. A general rule for reporting your income is that if you receive a form for it, you likely have to report it, but when in doubt, you should check with a tax professional.