Tax season is once again upon us! Most of us successfully file our taxes by April 15 and never give it another thought, but occasionally we can make mistakes that cause delays in processing, rejection of our returns, or even audits. To make sure this doesn’t happen to you, avoid making the following very common mistakes:
Simple errors. Believe it or not, one of the most common tax filing mistakes is entering the wrong social security number, or leaving off a digit or two. Another common error is entering the correct information, but on the wrong line. Pay close attention to instructions, check your return carefully for errors, or consult a professional for help.
Errors in calculation. This most often happens when you file a paper tax return, since the computer programs do the math for you. Double- and triple-check your calculations to be sure everything is correct. Even a small mathematical error can cause a delay in processing your return.
Failing to report stock sales. This is a major error, often seen with retirees who depend upon their investment income. It’s common to assume you don’t have to report stock sales if you took a loss, but the IRS will receive a 1099 form showing the amount of the sale. They will assume the sale is taxable income, unless you report the purchase and sale prices on your return to compute the taxable gain (or loss). Failing to report this information can result in your return being rejected or audited.
Improper reporting of retirement fund distributions. The cost basis, or amount you paid for your shares, is adjusted for items such as transaction fees and returns of capital. If you sell shares, this can affect your tax liability. It’s best to consult a tax professional to make sure you’re reporting the correct amount of income.
Failing to ask for an extension. If you find yourself rushing to meet the deadline, you’re more likely to make careless mistakes on your return. You’re also more likely to overlook deductions that can lower your tax liability. It’s better to ask for an extension and take the time to file your taxes correctly.
