Tax returns are something you want to get right the first time. A math error could cause processing delays or worse, like a refund adjustment or a penalty.
And while the use of tax software these days reduces the number of errors we make, it certainly hasn’t eliminated them.
The IRS keeps data — most recently from the 2021 tax year — on the most common types of math errors it sees on tax returns.
Following are some common tax mistakes to avoid.
1. Child tax credit
The number of 2021 tax returns with this type of math error: 4,250,168
Many lower-income and middle-class parents claim the child tax credit, first created in 1997. It’s just one of many tax breaks available for parents. For 2021, 25% of the math errors found were related to the child tax credit.
That’s a massive surge from prior years — the IRS noted just over 110,000 instances of this error for tax year 2020. The IRS suggests this is due to errors in reconciling the tax credit over multiple years:
“In TY 2021, taxpayers reconciled any advance Child Tax Credit (CTC) payments they had received and claimed any remaining credits they were eligible for. This count includes both errors related to taxpayers claiming any additional credit, and those related to repayment of an excess advance CTC paid.”
An audit of the issue found it was partly the government’s fault, noting “the IRS erroneously sent 3.3 million payments to 1.5 million taxpayers who were not eligible to receive an advance payment” and that about 3 million taxpayers were not correctly notified they were potentially eligible for the credit.
2. Tax calculation/other taxes
The number of 2021 tax returns with this type of math error: 217,972
The IRS broadly defines this category to include “all errors associated with the calculation and assessment of income taxes, as well as other taxes” including self-employment tax, alternative minimum tax and household employment tax. Taken together, these sort of mistakes accounted for 1.3% of what we got wrong on 2021 taxes.
3. Adjusted gross income
The number of 2021 tax returns with this type of math error: 171,568
Adjusted gross income, or AGI, is crucial in determining how much income you’re taxed on each year. It makes sense that adjustments to that income, and understanding what expenses are deductible, would account for a significant number of taxpayer errors — 1% of them.
4. Earned income tax credit
The number of 2021 tax returns with this type of math error: 99,515
The earned income tax credit is one of the most valuable tax credits available and available to low to moderate-income workers between ages 25 and 64. For the 2021 tax year, it accounted for 0.6% of math mistakes.
5. Standard/itemized deduction
The number of 2021 tax returns with this type of math error: 90,462
The Tax Cuts and Jobs Act of 2017 simplified the choice of whether to itemize tax deductions by making the standard deduction much higher. But not everyone has given up on itemizing — and that’s probably where most of the 0.5% of all math errors in this category come from.
6. Education credits
The number of 2021 tax returns with this type of math error: 59,988
These tax credits are designed to make the cost of college less cumbersome for students of all ages. This category, which includes the lifetime learning credit and the American opportunity tax credit, represents about 0.4% of all math mistakes.
7. First-time homebuyer credit repayment
The number of 2021 tax returns with this type of math error: 52,558
A total of 0.3% of all math errors the IRS sees relate to the first-time homebuyer tax credit, which has a number of potentially confusing rules for when and how it must be repaid.
8. Excess withholding of Social Security payments
The number of 2021 tax returns with this type of math error: 50,694
Another 0.3% of math errors likely stem from taxpayers’ employers. When an employer accidentally withholds too much money for Social Security from someone’s paycheck, there is a particular process to follow in fixing it.
Usually, the employer does this, but in some cases the taxpayer may file a Form 843, “Claim for Refund and Request for Abatement.” This form has multiple pages of instructions.
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