Avoid These 6 Common Tax Return Mistakes

Jim Wang
March 12, 2012

I never like doing my taxes. I don't know if it's because taxes are so complicated, or if I just have this image in my head of the IRS being his uncaring, evil entity just waiting for me to make a mistake so they can swoop in and penalize me. Tax season always makes me a little edgy. I'm usually very careful when it comes to doing my taxes; I make sure to include all the proper forms and I make sure I get all those great tax deductions. But after I file, I am left with the sinking sensation that I forgot something.

Don't be like me. Here is a list of six easily avoidable mistakes to keep in mind when you're filing your return.

1. Not claiming the correct status. Your filing status is based on your status as of December 31of that filing year. So for tax year 2011, your status is based on your status as of Dec.31, 2011, and not today. If you got married in January, both you and your spouse will file as single filers. If you got married in December, you can't opt to file as a single filer (you can pick married filing separately or married filing jointly.) If you had a baby in February, unfortunately your little one will not be a dependent on the taxes you file in April. Picking the correct filing status is crucial because so many credits and deductions, not to mention the tax brackets, change based on your status. This can have enormous implications on your return.

2. Failing to double-check your math. When the IRS receives your return, one of the first things it does is check your arithmetic. If it's wrong, your return will be delayed and, in the worst possible case, be subject to an audit. Simple arithmetic errors, which are completely avoidable when you file with software, aren't as uncommon as you think. Adding 1 + 1 is easy, but adding different lines on several forms, on different pages, then subtracting them from other lines is a little trickier--especially when you've been flipping through IRS documentation for a few hours. Be sure to double-check all of your math before you sign and mail that return.

If you don't trust yourself to follow the IRS's obfuscated directions, you can always use tax-preparation software to complete your tax return and compare the final numbers.

3. Entering the wrong Social Security numbers. If you're filing a paper return, check that the numbers you wrote for your Social Security number are clear and legible. If you're filing an electronic return, make sure you typed in each of those numbers correctly. The IRS will compare all of these numbers with their database, including those for your spouse and dependents, to make sure people haven't claimed more than once on different tax returns (dependents can only appear on one return.) A common reason for someone to be audited is when divorced parents, each filing separately, claim the same person as a dependent. If they misread the number or you mistype it, you will all but guarantee additional scrutiny.

4. Forgetting to sign and date your return. If you forget to sign your tax return, the IRS won't consider it a valid return (this includes your spouse on joint returns.) From there, it's unclear what will happen except that the IRS will be requesting a signature from you with a supplemental letter, and your return won't be considered "filed."

5. Not checking for AMT. The Alternative Minimum Tax was created to make sure high-income taxpayers pay their "fair share," but it now ensnares a lot more households than originally intended. For many, you'll need to calculate whether you owe AMT, which disallows some deductions and credits. "Calculate whether you owe AMT" is as much fun as it sounds: You will need to recompute everything with AMT in mind and pay the higher of AMT or your normal tax liability. The IRS will do this when they get your return, and if you pick the wrong one, they'll come for the balance, changing an otherwise healthy tax refund into a tax bill.

6. Forgetting to include forms. It's mid-March, which means, by law, companies should have mailed you any tax-related forms you need to prepare your taxes. In theory, all your W-2s and 1099s are in your possession, so you can begin to do your taxes. It is still up to you to confirm that you received a 1099 from every entity, because letters do get lost in the mail. Or it might be sitting on the coffee table that night you came in late and never opened the letter. Either way, forgetting to include a tax form will usually result in an automatic paper audit via a CP2000 form.

If you do make a mistake, such as finding an errant 1099-INT, you should file a 1040X Amended Return as soon as possible. It's only available by paper and it lets you list what you originally put, what it should have been, and why you are making the change. If you are making changes to multiple years, each year will need a separate Form 1040X mailed in its own envelope. Mistakes happen, especially when it comes to taxes, and the IRS is surprisingly forgiving if you catch them early and make the necessary changes.

There's one theme among most of these boneheaded mistakes: Many can be avoided if you use tax preparation software.

Jim Wang writes about personal finance at Bargaineering.com. When he's not tackling money issues, he's usually looking forward to his next vacation and writing about it at Wanderlust Journey.

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