Filing a Tax Return: Avoid These Common Errors - March 2022
Money
Contributed by : Mukesh Makker
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While not all mistakes on tax returns cause delays in refunds, as the April 18 deadline approaches, taxpayers are advised to steer clear of the common tax return errors listed below to ensure a timely refund.
Not Using Electronic Filing
While this isn't necessarily a mistake per se, electronic filing 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.
Due to the backlog of returns related to COVID-19, processing paper tax returns could take much longer than usual, and electronic filing is encouraged. If filing a paper return, taxpayers should double-check the mailing address on IRS.gov or on the form instructions to avoid processing delays.
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. Wages, dividends, bank interest, and other income received that was reported on an information return should be entered carefully on your tax forms. This includes any information needed to calculate credits and deductions.
Using Incorrect or Misspelled 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 the SSN of any person they claim as a dependent on their individual income tax return. If a dependent or spouse does not have and is not eligible to get an SSN, list the Individual Tax Identification Number (ITIN) instead of an SSN. Likewise, a name listed on a tax return should match the name on that person's Social Security card.
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.
Forgetting to Answer the Virtual Currency Question
The 2021 Form 1040 asks whether, at any time during 2021, a person received, sold, sent, exchanged, or otherwise disposed of any financial interest in any virtual currency. All taxpayers must answer this question - not just taxpayers who engaged in a transaction involving virtual currency.
Not Using the Correct Bank Account and Routing Numbers
Requesting direct deposit of a federal refund into one, two, or even three accounts is convenient and allows the taxpayer access to their money faster. Make sure that 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 by completing Part 2 of Form 8888, Allocation of Refund (Including Savings Bond Purchases), with their tax return. Your tax filing must be error-free to receive the Treasury bonds, however.
Figuring Credits or Deductions
Taxpayers can make mistakes figuring things like their earned income tax credit, child and dependent care credit, child tax credit, and recovery rebate credit. The Interactive Tax Assistant Tool on IRS.gov can help determine if a taxpayer is eligible for tax credits or deductions. Tax software will calculate these credits and deductions and include any required forms and schedules. Taxpayers should double-check where items appear on the final return before clicking the submit button.
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).
Failing To Keep a Copy of Your Return
When ready to file, taxpayers should make a copy of their signed returns and all schedules for their records.
Not Requesting an Extension, if Needed
Taxpayers who cannot meet the April 18 deadline this year can easily request an automatic filing extension to October 17, 2022, and prevent late filing penalties. Remember that while an extension grants additional time to file, tax payments are still due April 18, 2022
| About Author |
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Mr. Maker is a certified Public Accountant and serving the South Asian community since 1993.
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Website: https://taxprofessionalsnw.com/newsletter.php#1
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