Let’s be honest for a second, does anyone actually look forward to tax season? Unless you’re a number-crunching enthusiast, the arrival of tax forms typically brings with it a mix of mild anxiety, procrastination and the nagging fear that he/she might mess something up. We’ve all been there. You sit down with a mug of coffee, a chunk of paper and the best of intentions just to damned well find yourself going down a rabbit hole with Google on tax codes at 2 o’clock.
But here is the secret that industry veterans know: The vast majority of tax nightmares aren’t caused by complex fraud and massive schemes. They are caused by simple and preventable human errors.
As we enter another season, for all those who are being courted here and have questions about filing confidently, I would not just let you survive – I would encourage you to file confidently and to get every single dollar that you deserve. To help you navigate the choppy waters of the IRS tax return timeline, we have compiled a deep dive into the most common pitfalls taxpayers face. By avoiding these stumbling blocks, you can ensure your IRS tax filing is smooth, accurate and arguably even; dare we say it; easy.
Grab that coffee, take a deep breath and let’s walk through the common IRS tax filing mistakes you need to avoid this year.
The “I’ll Do It Later” Trap: Mismanaging the IRS Tax Return Timeline
Procrastination is the accuracy adversary. We often see taxpayers waiting until the very last week of the IRS tax return timeline to even open their envelopes. When you rush, you panic. When you panic you make mistakes.
The IRS tax return timeline is strict for a reason. While the filing deadline is usually in mid-April the process should begin much sooner. Waiting until the eleventh hour means you are more likely to miss a document that arrived in late January or that you will not have time to answer questions from your accountant.
In addition, if you are in a rush to beat the clock, you may not have time to file for an extension. An extension to file does not constitute an extension to pay. If you owe money, the IRS for tax return payments expects that cash by the original deadline. Ignoring the IRS tax return timeline can lead to failure-to-file penalties, which are often much higher than failure-to-pay penalties.
The Fix: Mark your calendar now. treating the IRS tax return timeline as a series of small deadlines rather than one big looming date. Set a date to collect documents, a date to go over documents and a goal date to file at least two weeks before the actual date.
The Math Meltdown
In the era of advanced software you would think errors in maths would be a thing of the past. Surprisingly, they remain one of the top reasons for IRS tax filing delays. Whether on paper (which we don’t recommend) or you are entering data into software manually, a simple transposition of numbers; $52,000 instead of $25,000; can cause an immediate red flag.
The IRS for tax return processing systems are automated. They cross reference the numbers that you enter with the forms they have been given by your employers and banks. If 1 + 1 results in 3 on your back then the system stops your processing. This can take weeks or months to delay your refund.
The Fix: Be sure to always double-check your entries. If you are handling your own IRS tax filing, read the numbers backward to catch transposition errors. Better still, enlist the help of a professional or software that will import data directly from your financial institutions to reduce the risks of manual data entry.
The “Side Hustle” Slip-Up: The Unreported Income
The gig economy has changed how we earn but it has also complicated the IRS tax filing process. A common misconception is that if you did not receive a 1099 form then you don’t have to report the income. This is a myth that will get you in hot water.
Whether you sold handmade crafts online, drove a few hours for a rideshare app or dabbled in cryptocurrency, the IRS for tax return purposes considers virtually all income taxable. The IRS gets copies of 1099s from plenty of platforms. If your IRS tax filing doesn’t match the income they have on record, you will almost certainly receive a notice (CP2000) proposing additional taxes and penalties.
Crypto is not only a particularly sticky area lately. The IRS for tax return audits is increasingly focusing on virtual currency. Failing to check the box requesting whether you transacted in digital assets or failing to report gains is a big compliance issue.
The Fix: Be sure to gather records for all income streams and not only those that sent you a piece of paper. Review your bank statements for any deposits that might be considered taxable income to ensure your IRS tax filing is bulletproof.
Filing Status Fumbles
Choosing wrong filing status is more common than it may appear and has a massive impact on your standard deduction and tax brackets. Many taxpayers automatically file “Single” or “Married Filing Jointly” without thinking if they might qualify for one of the many more favorable statuses such as “Head of Household.”
For example, a single parent who pays more than half of the cost to keep up his/her home might file as “Single” out of habit, not taking advantage of the larger standard deduction as well as more favorable tax brackets available to a Head of Household. Conversely, couples in the middle of a separation often struggle with how to handle their IRS tax filing; filing jointly, separately or as single (if divorced by year-end).
The IRS for tax return assessments is rigid regarding these statuses. If you say you are Head of Household and you do not qualify for the strict criteria, you are tempting an audit.
The Fix: Don’t guess. Use the interactive tools provided by the IRS for tax return guidance or consult a professional to determine the most advantageous (and legal) status for your specific situation.
Social Security Number-Scrambling
It sounds incredibly basic but incorrect Social Security Numbers (SSNs) are a common reason for returned returns. This occurs regularly with dependents. You are rushing to finish your IRS tax filing and you accidentally type a wrong digit for your child’s SSN.
The IRS for tax return system validates SSNs against the Social Security Administration database instantly. If there is anything not quite right about names and numbers, the return is rejected. This becomes a nightmare if you are trying to file at the very end of the IRS tax return timeline, as you might miss the deadline while trying to correct the error.
The Fix: Pull out the actual Social Security cards, verifying every digit for yourself, your spouse and your dependents is a five-minute task that can save you weeks of hassle during the IRS tax filing process.
The “Standard vs. Itemized” Dilemma
Since the Tax Cuts and Jobs Act saw the standard deduction almost doubled, fewer people are itemizing. However, many taxpayers still make some mistakes here. Some stick with the standard deduction even when itemizing would actually save them money (especially those who have high mortgage interest or make large donations to charity). Others try to itemize without the necessary proof, cluttering their IRS tax filing with deductions they can’t substantiate.
Another common mistake is to attempt to deduct the amount of expense that is no longer deductible or having a misunderstanding about the thresholds. For example, medical expenses must pass a certain percentage of your adjusted gross income in order to be counted. The IRS for tax return review process is strict on documentation for itemized deductions.
The Fix: run the numbers both ways). Good Tax software will do this for you automatically. If you do itemize, make sure you have receipts for each and every dollar claimed. The IRS for tax return audits often target itemized deductions that look disproportionate to income.
Forgetting the Signatures
After doing all the hard work, gathering documents, crunching numbers, navigating the IRS tax return timeline; imagine having your return rejected because you forgot to sign it.
For a paper return, an unsigned form is just as good as trash to the IRS. For electronic IRS tax filing, you must sign using a PIN. A high number of joint returns are rejected, however, because only one spouse “signed” the electronic form. Both spouses must verify and sign a joint return for the IRS for tax return acceptance protocols to validate it.
The Fix: This is a rather elementary sanity check. Before hitting send or sealing the envelope ensure that all the signature fields are up to date. It’s the final step in a successful IRS tax filing.
Direct Deposit Disasters
You want the refund of your money and fast. The fastest method of getting it is by way of Direct Deposit. However, one fat finger mistake here and your refund can be sent up into the banking abyss.
If you enter the wrong account or routing number, the IRS for tax return refund system may bounce the payment back (which triggers a paper check and a long delay) or, in worse scenarios, deposit it into someone else’s account. Resolving a wronged refund is a notoriously hard and wiggly process.
The Fix: Triple check out your banking info.” Read the numbers to yourself or to a partner of yours out loud. This small step ensures the happy ending to your IRS tax filing journey.
Ignorance of State Tax Obligations
We talk a lot about the IRS tax filing but we often forget that the IRS is just the federal level. Most taxpayers are also bound to have state filing obligations. A common mistake is to focus so much on the federal return that they forget to give the state return much thought and either make mistakes or miss deadlines.
Furthermore, if you had moved to a different state during the year or perhaps you worked remotely for a company located in a different state, you may have to file multiple state returns. The IRS tax return timeline usually aligns with states but not always. No consideration of state-specific credits/deductions is essentially leaving free money on the table.
The Fix: Treat your state return with the same seriousness as your federal IRS tax filing. Check the residency rules, in case you moved, and make sure you aren’t being doubly-taxed on income.
The DIY Hero Complex
There is a time to DIY like fixing a leaky faucet or painting a bedroom. However, when your financial life gets complex; buying a home, starting a business, trading stocks; trying to handle your own IRS tax filing can be risky.
We see a lot of people with complex situations using free software of the most basic kind that is not suited to do something with the peculiarities of their finances. They might miss obscure credits, misreport depreciation or misunderstand the IRS for tax return instructions regarding capital gains. The monies “saved” on professional fees are often lost ten times over in missed deductions or future penalties.
The Fix: Don’t lie about your ability. If you feel overwhelmed or unsure about how to interpret the IRS tax return timeline and rules, it’s time to call in a pro. It’s an Investment for Peace of Mind.
Confusion about Charitable Contribution
Charitable giving is great and the tax break is a nice bonus. However, the rules for claiming these on your IRS tax filing are specific. You can’t just estimate how much the old clothes that you dropped off at a donation bin are worth. You need receipts and for non-cash donations greater than $500, you need to file an extra form (Form 8283).
A frequent error is to take the full purchase value of an item donated rather than its fair market value. The IRS for tax return scrutiny on high charitable deductions is real. If your donations are out of proportion for your income, you are tipping yourself off to a closer look.
The Fix: Keeping Impeccable Records. If you donate, get a receipt. If the donation is substantial, ensure you understand the appraisal requirements required by the IRS for tax return regulations.
Falling for Tax Scams
This isn’t a filing mistake per se but it’s a mistake that happens during the season. Scammers know you are stressed about the IRS tax return timeline. They send phishing emails posing as the IRS, claiming there is an issue with your IRS tax filing or that you are owed a massive refund, just to steal your identity.
Remember: The IRS does not make the first contact in any form – via email, text messages or social media channels – with taxpayers to request any personal or financial information from them.
The Fix: If you receive a suspicious message about your IRS tax filing, do not click links. Go to the official IRS Website or call your Accountant. There is no reason why you can’t protect your data just as you can file your return.
Conclusion: You’ve Got This!
Tax season isn’t a nightmare for everyone that must be faced. It is just a once per year maintenance checkup on your financial life. By being aware of these common pitfalls; from respecting the IRS tax return timeline to double-checking your math; you are already ahead of the curve.
The key takeaway? Don’t be in a hurry, organize and do not be afraid to ask for help. A perfect IRS tax filing is the result of preparation, not magic.
We hope this guide will help you get through the season with confidence. If you find yourself staring at your forms in confusion or if you just want to ensure that you are maximizing every possible opportunity within the IRS for tax return guidelines, remember that you don’t have to go it alone.
At Glocal Accounting we are here to help you change your tax season stress to success and be accurate and pain-free every step of the way.
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