Home > Personal Finance > 10 Ways You’re Filing Your Taxes Wrong

Comments 0 Comments

Good news: You made it through winter and spring is finally here. Bad news: Your taxes are due! Fortunately, the most common mistakes made on tax returns are fairly easy to avoid. Why should you care? These common mistakes often mean you’re paying more taxes than necessary or, even worse, you’re under-reporting your income and setting yourself up for interest and penalties on unpaid taxes. Here are the top tax mistakes you make when filing your return.

1. Leaving Money on the Table

You might be leaving money on the table by forgetting to use up all of your Flexible Spending Account (FSA) dollars or not making various tax-advantaged contributions to your individual retirement and 529 accounts. You have until Dec. 31 to contribute to a 529 account (some states allow deductions for your contributions) and to use money in your FSA account. You can make contributions to your Traditional and Roth IRA accounts until April 18, 2016.

Another common way you’re leaving money on the table – not filing a return at all. Choosing to not file a return because your income for 2015 doesn’t require it might mean you’re leaving money on the table. If you’re eligible for a refund, you have to file a return to claim it. In 2011 the IRS reported holding about $1 billion of unclaimed refunds, simply because people didn’t file a return. If you think this might apply to you, the IRS gives you three years to file old returns for unclaimed refunds.

2. Bad Math

It sounds a little obvious, but year after year, arithmetic errors and copying wrong numbers from your tax forms to your tax return are among the most common – and costly – mistakes. When you’re filling out your tax forms, go slowly and double-check yourself. A lot of mathematical errors can be avoided if you’re using tax software that does the calculating for you.

3. Wrong Name

A misspelled name will slow down the processing of your return. Misspelled or wrong names are most common for newlyweds or people who have changed their name in the last year. Make sure the name you use on your return matches the name on your Social Security card.

4. Wrong Filing Status

What is your filing status? This is a common source of confusion and an overlooked mistake. If you have a tax preparer, make sure you update them on any life changes such as getting married or divorced. Your relationship status on Dec. 31 will determine your filing status for the entire year. Head of Household causes the most confusion. In general, you must be single and have covered a majority of the costs of “maintaining a home” for both yourself and a “qualifying person.”

5. Wrong Bank Account Details

If you plan to use direct deposit to receive your refund, double check the bank account information you provide. If you enter the wrong account information you won’t receive your refund or have the money you owe withdrawn correctly and it’s a huge pain to fix.

6. Unreported Income

This mistake – intentional or not – can be costly. If you have unreported income and the IRS uncovers it, you’re looking at interest and penalties for unpaid taxes. An honest mistake doesn’t give you a pass here so spend a few extra minutes reviewing your return, thinking through the year and your accounts to make sure you’re not forgetting any income sources. It’s often the 1099 income that’s overlooked – things like contract work, interest and dividends. The IRS receives copies of your 1099s and expects to see those sources of income on your return.

7. Forgetting to Sign the Return

It’s easy to get so focused on preparing your return and filing it on time that you forget to sign your return. This also goes for your preparer. If someone else is preparing your taxes, double check that he or she has signed it.

8. Missed Deadlines

This year, 2015 federal returns are due on April 18, 2016. Filing an extension? As a friendly reminder, extensions apply only to the paperwork and not the money you owe the IRS. The IRS is happy to give you an extension on filing your return but not for the money you owe. You’ll owe interest and possibly penalty fees on any taxes due but not paid by April 18, 2016. Remember, a tax lien can hurt your credit score. You can see where your score currently stands by viewing your free credit report summary, updated every 14 days, on Credit.com.

9. Not Properly Claiming Charitable Contributions

If you’re charitably inclined and itemizing your deductions, remember that donations in all forms – cash and goods – can be claimed on your tax return. This is an area where you need to keep good records and receipts. Also, make sure that you’re only claiming deductions for organizations that have tax-exempt status with the IRS.

10. Being Too Aggressive

It’s easy to get so caught up in minimizing your taxes that you start to make unwise decisions. For example, shopping around for the biggest refund will often lead you to a tax professional that is using incorrect or aggressive accounting – a risk not worth taking. Another form this might take is being too aggressive with deductions. For example, deductions for home offices and unreimbursed business expenses are often abused and misunderstood. A good practice is to save receipts and your company’s reimbursement policy so you can support your deductions in case of an audit. If you’re claiming a home office, make sure you stay up to date on the current rules and truly qualify for the deduction.

Organizational Tip

I recommend keeping a spreadsheet that lists out all of your tax information – sources of income, 1099s, charitable gifts, IRA and 529 contributions, etc. Update it each year and it will help you avoid some of these common mistakes. You’re less likely to forget about a 1099 if it’s listed in your prior year’s tax information. This will also make passing off information to your tax preparer much easier year to year.

Important Deadlines

Here are important dates for 2015 taxes to keep on your calendar:

  • April 18, 2016 – Federal tax return due date
  • State Return Due Dates – Most states follow the federal due date of April 18, but some states have later deadlines. Check your state’s deadlines here.
  • Oct. 17, 2016 – Last date to file 2015 federal returns for extension filers

More on Income Tax:

Image: BernardaSv

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team