April 6, 2022
Each year, tax season comes without fail. We file and hope that we haven’t missed anything. While many of the tax filing mistakes that people make are small, some can affect the bottom line anywhere from a little to a lot. Here are a few of the most common tax filing mistakes that can cost you.
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Filing Too Early or Too Late—Traditionally, taxes must be paid by April 15 of each year. You must also file your return or file for an extension by that date. In 2022, April 15 is a holiday in Washington, D.C.—Emancipation Day—so the IRS moved this year’s due date to April 18.
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Too Early. Many of us like to file our taxes as soon as possible. The IRS began accepting and processing submissions on January 24. File too early, however, and you may base your return on incorrect or incomplete figures.
While the IRS requires that many of the documents needed to prepare your taxes be sent out by January 31, some can run later. If you discover that you need to file an amended return because you owe more taxes, you’ll need to pay the taxes as soon as possible to avoid interest and penalties. -
Too Late. Conversely, some people procrastinate, but failing to meet tax deadlines can be costly. Failing to file carries a standard penalty of 5 percent of the amount due for each month your filing is late. Paying late carries a penalty of 0.5 percent of the unpaid amount up to 25 percent of what you owe plus interest on the unpaid taxes—another 3 percent.
Filing for an extension will give you until October 17 to complete your return, but you’ll still have to pay what you owe—or make payment arrangements—when you file for the extension.
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If you’re owed a refund, the IRS won’t release your refund until you file. If you don’t file and claim the money within three years, you’ll forfeit the money.
- Not Filing Because You Didn’t Earn Enough To Have To—If you didn’t earn enough to have to file, you might want to file because you may be owed a refund. If you worked and your employer withheld federal taxes, you may be eligible for a refund. Depending on your circumstances, you may also be eligible for an earned income tax credit. However, you won’t get that refund unless you file.
- Not Filing for an Extension When You Need One—Filing for an extension is free and automatically gives you six additional months to complete your tax return. Just remember that according to the IRS, “An extension of time to file your return does not grant you any extension of time to pay your taxes.” An extension, however, can help you avoid penalties and even give you a little financial leeway when life events make filing on the April date seem impossible.
- You may be owed a refund but can’t have the return prepared for the April date.
- You’re still awaiting documents from a divorce, death, illness, move or other life event that are necessary for an accurate return. You can pay the estimated tax owed and file by the extension date.
- You may want to be able to make a contribution to an IRA but need more time to do so.
- You may need more time to decide whether a loss should be entered on this year’s return or the next year’s.
You can file for an extension even if you can’t pay the full amount of tax you owe. The IRS advises paying what you can and making payment arrangements if necessary—a short-term extension to pay, an installment agreement, an offer in compromise or a temporary delay in collection.
- Filing Under the Wrong Status—Each filing status has different income thresholds, qualifications, tax rates and brackets, and standard deduction amounts. Filers must choose from five—single, head of household, married filing jointly, married filing separately, and qualifying widow or widower with a dependent child.
Often, people have options—whether to file as single versus head of household, for example, or married filing jointly versus married filing separately. Depending on your life circumstances, filing under one status may be more tax-advantageous than another. However, the status you choose must be accurate; you must be able to satisfy all of the conditions for that status.
- Entering Erroneous Figures or Calculations—Tax returns are nothing but numbers and calculations. Even Social Security numbers are numerals that you must enter correctly if you want to be able to claim the proper deductions and credits.
For calculations, electronic tax return software can eliminate many of the errors so inherent to the stressful calculations associated with taxes. However, if you’re doing your own math, you’ll want to check and double-check your figures and calculations to ensure they’re correct.
Even with software guiding you, you still need to be sure that you don’t omit, add or misplace any figures. Typos like transposed numbers, wrong numbers, schedule transfer errors and even wrong line entries can also affect your return.
The need for numerical accuracy also extends to ensuring you enter the correct bank account and routing numbers for your refund. Errors can place your refund in limbo and delay its deposit in your account.
- Failing To Claim Deductions or Credits You’re Eligible To Take—Deductions and credits can be confusing for many taxpayers. Deductions reduce your income figure before you calculate your taxes, while credits reduce the amount you owe. The former adjusts the start figure while the latter adjusts the end figure.
Both are breaks that can be forgotten or overlooked because they tend to be linked to individualized circumstances like life stages, life events and employment—everything from the charitable contribution deduction, the Child Tax Credit, deductions for educator expenses and moving expense deductions for military members to the home office deduction, IRA deductions, child and dependent care credits, and residential energy efficient property credits, for example.
The complexity of deduction and credit eligibility is one of the qualities that makes electronic tax filing software so attractive. Most programs guide you through a detailed series of eligibility questions to prompt the correct application of deductions and credits and ensure you haven’t forgotten or overlooked anything.
Filing a tax return ranks among some of the most important responsibilities you have. If you do make a tax filing mistake, you’ll probably be able to amend it, but you may also owe whatever you should have paid plus any penalties as well as interest that accrues from the date of your original filing.
Financial Help from KOFE
Taxes can seem like a daunting task each year, but there are tools you have to make it easier for yourself. Discover money management tools and tips for daily life through our free KOFE portal for La Cap members. Learn tips on saving, budgeting, and even taxes.