How to Avoid the Tax Mistakes That Could Cost You Thousands

Simple errors could lead to costly mistakes on your federal tax return. For instance, while it seems like a no-brainer that you’d remember to sign your tax form or that your arithmetic would be correct, it’s worth it to slow down and double-check yourself.

Avoid these five common tax errors that can hurt your wallet and peace of mind.

Key Takeaways

• Incorrect filing status can result in higher taxes.
• Errors with income, Social Security numbers, or other details can delay your refund.
• Filing before you receive all your forms could cause you to pay more.

1. Incorrect Filing Status

Choosing the wrong filing status when you file your federal income taxes could be costly.

“Certain filing status–like Head of Household–offer better tax brackets and a higher standard deduction than single status. Choosing the wrong filing status could cost you more in taxes,” says Joanne Burke, a certified public accountant and founder of Birch Street Financial Advisors.

“You can also miss out on valuable tax credits like the Earned Income Tax Credit and the Child and Dependent Care Credit, which can be costly.”

Take time to review and choose the appropriate filing status to maximize your benefits.

2. Entering Information Inaccurately

Mistakes in entering your personal information, like income or Social Security numbers, can cause significant delays and confusion.

“One major impact is delayed processing and refunds. If critical information, such as income, filing status, or Social Security numbers, is entered incorrectly, the IRS may take additional time to review the return and resolve discrepancies, which could hold up any refund you’re expecting,” Burke says. “For e-filed returns, substantial errors might result in immediate rejection, while paper returns with inaccuracies may prompt the IRS to send a notice, further delaying the process.”

With inaccurate information you could pay too much or too little on your taxes.

“Inaccurate reporting can also lead to incorrect tax calculations, resulting in underpayment or overpayment of taxes. Underpayment due to errors, like underreporting income or claiming ineligible deductions, could mean owing additional taxes, along with penalties and interest. On the other hand, overpayment might reduce your cash flow unnecessarily until the error is corrected through an amended return,” Burke advises.

Carefully double-check all the information you input, especially income details, filing status, and Social Security numbers.

3. Filing Too Early

Don’t make the mistake of filing your taxes before you receive all your documents.

“It’s great to be on top of your return, but make sure that you have received all necessary documents before filing your return. You’ll benefit by waiting to file until you obtain all the details you need to claim child care expenses, student loan interest, the premium tax credit, and other tax benefits,” says Alison Flores, manager with The Tax Institute at H&R Block. 

Waiting until all forms are in hand will ensure you don’t miss deductions or leave money on the table.

4. Math Mistakes

Mathematical errors can lead you to paying the wrong amount in taxes. These mistakes are more common than you might think, and they could trigger IRS audits.

“Simple mathematical errors are one of the top reasons for IRS audits. Double-check all amounts you enter and use tax software like H&R Block that handles the calculations to minimize the risk of errors,” Flores says. 

Tax software can help reduce the risk of errors and give you confidence in the accuracy of your return.

5. Unsigned Tax Forms

It may seem like a small detail, but forgetting to sign your return can cause a delay. You can avoid this error by filing your taxes electronically and digitally signing it. 

“Make sure your return is signed and dated, especially for joint returns that require both spouses’ signatures,” Flores says.

What to Do If You’ve Made a Tax Mistake

If you’ve made a mistake on your return, you should file an amended return as soon as you realize it. Typically, the deadline is three years from the original date of file or two years from when you paid the tax (whichever is later.)

“File the amendment as soon as possible if you owe additional tax to minimize penalties. You’ll need to ensure the IRS has accepted your original return before amending, and if expecting a refund, wait until you receive it,” Flores advises.

The Bottom Line

Common tax mistakes can lead to delays, missed refunds or a higher tax bill. To avoid costly errors, pay special attention to personal details, your filing status, financial information, math calculations, and your signature. Consider using tax software for ease and accuracy, especially for handling calculations. By taking your time and being diligent, you can ensure your tax return is error-free and avoid unnecessary costs.