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Do Not Make This Tax Filing Mistake
Tax filing can be complex, and even the most minor mistakes can have significant consequences. Therefore, avoiding errors when preparing and submitting your tax returns to ensure compliance with the law and prevent potential penalties or audits is essential.
The deadline for income taxes has passed, and you still haven’t filed yours. The responsibility keeps slipping your mind. You keep telling yourself that you’ll “eventually” get it done.
This is a big mistake. Find out why you should file your taxes as soon as possible.
Here are some common tax filing mistakes to watch out for:
Incorrect or Missing Information
Failing to provide accurate and complete information is one of the most common tax filing mistakes. Ensure that your details, such as name, Social Security number, and address, are entered correctly. Additionally, double-check all the numbers on your tax forms, including income, deductions, and credits, to avoid errors.
Simple mathematical errors, such as miscalculations or transposing numbers, can cause significant discrepancies in your tax return. Use tax software or a calculator to ensure accurate calculations throughout your forms. Recheck all the math before submitting your return to the tax authorities.
Filing Status Errors
Choosing the wrong filing status can directly impact the amount of tax you owe or the refund you receive. Make sure you select the correct status, such as single, married filing jointly, married filing separately, head of household, or qualifying widow(er), based on your circumstances and eligibility.
Late Filing Penalties
The IRS charges citizens with unpaid taxes who file late a failure-to-file penalty. The longer they take to file after the initial deadline, the bigger the failure-to-file penalty becomes.
How much is the penalty? After the deadline, the penalty is 5% of your unpaid taxes. The IRS will tack on another 5% penalty for every additional month you delay filing. The maximum penalty for late payments is 25% of your unpaid taxes.
Late Payment Penalties
If you have not paid your entire tax bill, you will face a failure-to-pay penalty from the IRS for missing this year’s deadline.
How much is a failure-to-pay penalty? It is 0.5% of your unpaid taxes. Like the failure-to-file penalty, this penalty will increase monthly without resolving the issue. Each month you don’t pay, another 0.5% will get tacked onto the penalty. The maximum penalty for failing to pay is 25% of your unpaid taxes.
Late Filing and Late Payment Penalties
You might wonder, what happens when you file and pay your taxes late? You will face a failure-to-file and a failure-to-pay penalty.
If you have to pay a combination of these penalties, the IRS will slightly adjust your debts. It will subtract the percentage of your failure-to-pay penalty from your failure-to-file penalty before adding it together. In the first month past the deadline, you would face a penalty of 5% of your taxes owed instead of 5.5%. The adjustment is minor, but you might appreciate owing a slightly smaller amount.
Failing to file your tax return or missing the deadline can lead to penalties and interest charges. Keep track of the tax filing deadline, typically April 15th for most individuals, and ensure you submit your return on time. Request an extension to avoid penalties if you can’t file by the deadline.
Ignoring State Tax Obligations
Many individuals focus solely on federal taxes and overlook state tax obligations. Each state has its tax laws and requirements, so ensure you know your state’s rules and deadlines. File your state tax return accurately and on time to avoid state penalties and interest.
Incorrect Bank Account Information
If you are entitled to a tax refund and choose direct deposit, provide the correct bank account information. Errors in account or routing numbers can result in delayed refunds or lost funds. Double-check the details before submitting your return.
Neglecting to Sign and Date
Remember to sign and date your tax return can render it invalid. Either spouse must sign a joint return if filing jointly. Check all the necessary signature lines and date fields before mailing or electronically submitting your return.
Losing Out on Your Refund
What if you don’t owe the IRS money? Isn’t missing the deadline fine?
No! If you don’t owe money to the IRS, you might be owed a tax refund after filing. So, when you delay the filing process, you delay your refund—which can be a considerable windfall. This year, the average tax refund payment was $2,933. The year before was just over $3,305. You could be stopping yourself from getting a big chunk of money all because you don’t feel like filing.
A considerable tax refund could be extremely helpful, especially if you live paycheck to paycheck. For instance, you can use it to fill up an emergency fund quickly. If you encounter a surprise expense, you can recover from it immediately. You can withdraw from your emergency fund and use it to resolve the problem.
Without that refund, you might not have an emergency fund. So, if you encounter an emergency expense, you might be unable to pay it off. You might need to consider an alternative way to handle the expense, like online applying for a personal loan. In that case, you can go to a website like CreditFresh to fill out and submit an online application for a personal loan. You could get approved for the borrowing solution, which you could use to pay off the expense quickly. Then all you would need to do is follow a loan repayment plan.
Another good use for a tax refund? Debt repayments! If you want to tackle a repayment plan and do it quickly, you can use the windfall to get it over with and take that responsibility off your shoulders.
So, stop delaying! You’re making a big mistake and costing yourself money. It’s time to take action and file your taxes.
Avoiding these common tax filing mistakes can help ensure a smoother and more accurate tax return process. Consider consulting with a tax professional or using reputable tax software to minimize errors and maximize your tax benefits. In addition, reviewing your return thoroughly before submission can save you time, money, and legal issues.