5 mistakes to avoid while filing taxes this year
Whether you find this article days before the filing deadline or months before, filing taxes can feel like a race to the finish line. Once they’re filed, you can check this yearly task off your to-do list and not have to worry about it for another year. We know the feeling.
So, whether you’re a sprint to the finish line filer or a triple checking champion, be sure to avoid the following mistakes while filing your taxes.
1. Forgetting paperwork
You’ll probably have to keep track of and submit quite a few different documents related to your taxable income and expenses. This can include everything from your job to specific investments. Here are some common forms to check for:
- W-2 for employment income
- 1099-G for unemployment income
- Self-employment forms such as income records to verify amounts not reported on 1099-MISC or new 1099-NEC and records of all expenses — check registers or credit card statements, and receipts.
- Rental income information such as Form 1040-ES
- 1099-R for pension, IRA, or annuity income
- Any documents related to charitable giving
- Student loan or education payment documents
Did you switch jobs this year? Get in touch with the HR or the payroll department at your previous company to see when you can expect forms. Did you do some freelance work? Double check to make sure you have all receipts for business-related expenses.
No matter what your situation is, be sure to stay in contact with all institutions that you are expecting documents from early on in tax season, and be on the lookout for corrected tax forms.
2. Missing or incorrect information
Leaving out a piece of information or providing an incorrect number can create headaches during tax season. These headaches can range from delays to IRS audits. So, be sure to check that all your information is correct, and steer clear of the following blunders.
Failing to report all income
This one is worth triple-checking. Failing to report all your sources of income can be a quick way for your return to end up on the IRS tax audit list. Be sure to check for the following sources of income for not only your federal taxes, but your state and local taxes:
- Earned interest
- Dividends in brokerage accounts
- Side hustle or any self-employment income
- Retirement income
- Unemployment income (if you lost your job in 2021, remember to include any unemployment benefits that you received)
Mistakes with personal information
We’ve all made this mistake in some way or another. Putting an extra number or letter on a form usually isn’t a big deal, but with federal income taxes, it can seriously delay how your filing is received and processed. Be sure to double-check all your information, especially the following:
- Social Security number
- Routing and account numbers
- Tax identification number
3. Waiting until the last minute
Procrastinating your tax filing brings along the familiar procrastination stresses, but with slightly higher consequences. Let’s think about this like getting ready for a night out. If you leave at the last minute, then ordinary things become major inconveniences.
Whether it’s not getting a green light or having to search for a parking spot, everything feels more stressful because there’s less margin for error. The same exact thing happens with tax filings.
Let’s check out a few reasons not to wait until the last minute to file.
The sooner you file, the sooner you get your refund
According to The Washington Post, 73% of filers received a tax refund. If you’re a part of that majority, your money is waiting for you! The sooner you get your federal income tax return wrapped up, the sooner you’ll receive your money.
Pro tip: The IRS also recommends direct deposit rather than traditional paper checks. Direct deposit is a faster, safer, more cost-efficient method of receiving your refund.
Taxes are time-consuming
Filing taxes can be exhausting and time-consuming. According to the IRS, the average taxpayer spends 13 hours completing their taxes.
Here’s how those 13 hours are spent:
- Six hours of recordkeeping
- Two hours of tax planning
- Four hours of completing and submitting forms
- One hour on other processes, like reviewing your tax return.
It can be easy, especially with online systems like TurboTax, to underestimate how long taxes will take you. So, be sure to budget plenty of time.
Avoid late fees
When you file last-minute, you can be prone to making more errors. These errors can present tricky situations and sometimes fees when filling out taxes.
Giving yourself plenty of time to correct mistakes and find the right form can eliminate costly late penalties, especially if you have a tax bill.
4. Choosing the incorrect filing status
Outside of spelling your name right and punching in the correct SSN, a top priority should be ensuring that you choose the correct filing status.
The five filing statuses are:
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er)
Your filing status affects everything from your tax bracket to your refund total. Your filing status also affects the deductions for which you will be eligible.
5. Missing a tax break
If there are any deductions or credits you are eligible for, that money is yours. Not checking for these would be like tossing an envelope of cash out the window.
Thankfully online tax preparation companies, like TurboTax or H&R Block, automatically check for most of these credits when you file electronically.
Time to tackle your taxes
You’re now equipped with the knowledge of what to avoid for this year’s taxes, and soon it will be time to put that knowledge to work. So, get started early, double-check your documents, stay organized, and be ready for a successful tax filing.
For more information that will set you up for a drama-free tax season, check out more tax resources from M1.
M1 and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.