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Common Errors to Avoid When Filing a Tax Return - May 21

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Contributed by : Mukesh Makker
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While not all mistakes on tax returns cause delays in refunds, some do. As the May 17, deadline approaches, it pays to steer clear of the 10 tax return errors listed below.

1. Not using electronic filing. While this isn’t necessarily a mistake per se, filing electronically is the best way to cut the chances for many tax return mistakes while maximizing deductions to reduce the amount of tax owed. The reason for this is that the tax software your tax professional uses automatically applies the latest tax laws, checks for available credits or deductions, does the calculations, and asks taxpayers for all required information.


2. Failing to report all taxable income. Be sure to have income documents on hand before starting the tax return. Examples are Forms W-2, 1099-MISC or 1099-NEC. Underreporting income may lead to penalties and interest.


3. Using Incorrect names and Social Security numbers. Enter each Social Security number (SSN) and individual’s name on a tax return exactly as printed on the Social Security card. Persons generally must list on their individual income tax return the SSN of any person they claim as a dependent. If a dependent or spouse does not have and is not eligible to get a SSN, list the Individual Tax Identification Number (ITIN) instead of a SSN.


4. Not using the correct filing status. If taxpayers are unsure about their filing status, the Interactive Tax Assistant on IRS.gov can help them choose the correct status, especially if more than one filing status applies. Tax software, including IRS Free File, also helps prevent mistakes with filing status.


5. Forgetting to answer the virtual currency question. The 2020 Form 1040 asks whether at any time during 2020, a person received, sold, sent, exchanged or otherwise acquired any financial interest in any virtual currency. If a taxpayer's only transactions involving virtual currency during 2020 were purchases of virtual currency, they are not required to answer"yes" to the question.


6. Mailing paper returns to the right address. Paper filers should check the right address for where to file on IRS.gov or on form instructions to avoid processing delays. Note that due to staffing issues related to COVID-19, processing paper tax returns could take much longer than usual. Taxpayers and tax professionals are encouraged to file electronically if possible.


7. Not using the correct routing and account numbers. Requesting direct deposit of a federal refund into one, two or even three accounts is convenient and allows the taxpayer access to his or her money faster. Make sure the financial institution routing and account numbers entered on the return are accurate. Incorrect numbers can cause a refund to be delayed or deposited into the wrong account. Taxpayers can also use their refund to purchase U.S. Savings Bonds.


8. Forgetting to sign and date the return. If filing a joint return, both spouses must sign and date the return. E-filers can sign using a self-selected personal identification number (PIN).


9. Failing to keep a copy of your return. When ready to file, taxpayers should make a copy of their signed return and all schedules for their records.


10. Not requesting an extension, if needed. Taxpayers who cannot meet the May 17 deadline can easily request an automatic filing extension to October 15 and prevent late filing penalties. Keep in mind that while an extension grants additional time to file, tax payments are still due May 17.


About Author
Mr. Maker is a certified Public Accountant and serving the South Asian community since 1993.

Website: https://taxprofessionalsnw.com/newsletter.php#7

 

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