9 Common and Costly Tax Mistakes

If you haven’t done your taxes, the clock is now ticking. Tax day is April 15, and it’s in your financial interest to file soon, especially if you expect a refund.

But as you start filling in those forms, don’t let haste make waste. Mistakes can cost you time, money or both. Here’s a look at some of the most common tax-time screw-ups.

Mistake No. 1: Paying for tax preparation when you can get it free

Would you pay a couple hundred bucks for something you can get for free? Millions of Americans do it every year.

Companies such as TurboTax, H&R Block and TaxAct offer free tax software. Also, depending on your income level, you may qualify for any number of free services. For more, check out “6 Ways to Get Your Taxes Done for Free.”

Mistake No. 2: Getting your Social Security numbers wrong

On its list of common tax mistakes, the IRS puts incorrect and missing Social Security numbers at the top.

Long gone are the days in which you could claim dependents without a Social Security number. Today, every member of your household listed on your return needs to have such a number. Make sure to double-check all of the numbers before submitting your return to ensure there aren’t any transposed or missing digits.

Mistake No. 3: Spelling your name wrong

Sure, you know what your name is. But maybe you’re typing too quickly and hit a wrong key. Or you might be interrupted while filling out the form and start up again later at the wrong spot. There are plenty of scenarios in which people can — and do — misspell their own names on income tax forms. Such a simple error can lead to rejected returns and delayed refunds.

In addition, if you recently married or divorced and haven’t registered a name change with the Social Security Administration, be sure to use your previous name. The name on your forms needs to match the name listed in Social Security records.

Mistake No. 4: Making math errors

This becomes less of a problem if you use software to prepare and file your taxes. The computer will do all the calculations on your behalf, which virtually guarantees you’ll get it right.

However, the computer can’t know whether the numbers you’ve entered are correct. Double-check everything to be sure your return is accurate. It should also go without saying that if you’re still doing a paper return, use a calculator and do the math twice to confirm the results.

Mistake No. 5: Forgetting your John Hancock

There are two places this mistake can trip you up.

This first is by failing to sign a paper return before mailing it. The second is failing to sign your check if you’re sending in a payment. Either one can result in lengthy delays in processing your return.

You can avoid this mistake by filling in and signing your return electronically, and having tax payments directly withdrawn from your bank account. This saves on postage, too.

Mistake No. 6: Selecting the wrong filing status

This mistake may be most common for single parents.

For example, an unmarried parent who has a qualifying dependent and pays more than half the cost of keeping a home may be able to file as a head of household, a status that boosts the standard deduction. In addition, you can be considered unmarried so long as your spouse did not live with you for the last six months of the year.

Mistake No. 7: Missing valuable deductions or credits

It’s not enough to simply use the right form and the right filing status. If you want to maximize your refund, you also need to take advantage of every tax deduction and credit available to you. There are plenty of credits and deductions that have the potential to reduce your tax liability by thousands of dollars.

Your tax software or tax professional should help ensure you don’t miss anything you’re entitled to, but here are a few of the bigger credits and deductions you don’t want to miss:

  • American Opportunity Tax Credit: Available to college students of all ages, this credit is based upon college expenses and can provide up to a $2,500 tax reduction per year for four years.
  • Earned Income Tax Credit: Offered to low-income families, this credit is refundable, which means the government will send you cash even if you don’t owe any taxes. Sometimes this is overlooked when eligible families have incomes so low they aren’t required to file returns, so they miss out on claiming the credit.
  • Child and Dependent Care Credit: If you pay someone else to watch your children while you work, you may be able to claim a credit. According to the IRS: “The total expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals).”
  • IRA contributions: Contributions to Roth IRAs are not deductible. However, depending on your income and whether you have a retirement plan at work, you can deduct contributions to a traditional IRA.

Mistake No. 8: Failing to claim all your income

You might also make the mistake of thinking you don’t need to claim income unless you receive a W-2 or 1099 form. However, you’re supposed to claim all income for the year, including side jobs, gambling winnings and just about any money you have made in any other way.

Cheating Uncle Sam may seem like a victimless crime, but you’ll feel victimized if you’re ever audited and such omissions are discovered.

Mistake No. 9: Sending your return through the mail

If you insist on being old-school and sending your return through the U.S. mail, you’re making the final mistake on our list.

Filing through the mail is a mistake for many reasons. First, if you’re filing a paper return, you increase the chances of making one of the other mistakes listed above. Using software means lower odds of missing Social Security numbers, forgetting to sign your return and making math errors.

In addition, a good software program will help you root out deductions and credits you might otherwise miss. It should also guide you to the right filing status.

Filing electronically means you could have your refund cash in hand much sooner. If you’re not already e-filing, it’s time to get on this bandwagon.

Which mistakes have you made when filing taxes? What was the impact? Share with us in comments or on our Facebook page.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
Small Splurges That Make It Feel Like You’re Living Large
Small Splurges That Make It Feel Like You’re Living Large

Cutting costs is the shortest path to financial freedom. However, there are times when a little spending can produce big returns.

10 Ways Anyone Can Earn More Income
10 Ways Anyone Can Earn More Income

Looking for additional cash? Here are a bunch of options that are accessible to anyone with internet access.

Grow Your Savings in 2020 With These 5 Tricks
Grow Your Savings in 2020 With These 5 Tricks

Saving money doesn’t have to be painful. Here are some ways to game yourself into stashing more cash.

7 Ways to Save Money Without Trying
7 Ways to Save Money Without Trying

Saving money doesn’t always mean drudgery and sacrifice. These tools make it easy — sometimes even fun.

5 Secrets to Keeping Your Brain Sharp as You Age
5 Secrets to Keeping Your Brain Sharp as You Age

Forget young at heart — science says these tricks will keep you young in mind.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

5 Ways Joe Biden Wants Social Security to Change
5 Ways Joe Biden Wants Social Security to Change

Here’s where Biden — as well as Trump — stands on the future of the Social Security retirement system.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.