There's a reason so many professionals make a living helping other people with their taxes. Though filing a return, in theory, isn't difficult, in practice, there's plenty of room for error. And if you make a mistake on your taxes, you could face a host of consequences, from having your return rejected to landing on the IRS audit list.
With that in mind, here are a few big tax blunders to steer clear of.
1. Putting down the wrong Social Security number
Including an incorrect Social Security number on your taxes is a good way to get your return rejected. Thankfully, it's an extremely easy error to avoid. Just verify each family member's Social Security number by checking it against his or her original card. Don't guess at those numbers if you're not sure.
2. Choosing the wrong tax-filing status
The filing status you choose will dictate how much tax you pay on your income and what credits or deductions you're entitled to. You can choose from:
- Head of household
- Qualifying widow(er)
- Married filing separately
- Married filing jointly
You're only allowed to choose one filing status, so be sure to pick the right one. Keep in mind that you may lose out on certain tax breaks by picking the wrong status. For example, the very lucrative Earned Income Tax Credit is not available to married couples filing separately, and the same holds true for the Child and Dependent Care Credit, which helps offset your child care costs so you can hold down a job.
3. Writing off itemizing before running the numbers
When you file your taxes, you get to choose between claiming the standard deduction or itemizing on your return. Because the standard deduction is much higher now than it was several years back, it makes sense for most filers to take it. But that doesn't mean you should take it.
If you pay a lot of mortgage interest and property taxes and you have a lot of charitable donations to write off, then itemizing could make sense. Before you make that call, run your numbers to see if your totals exceed the following:
- $12,200 for singles and married couples filing separately
- $18,350 for heads of household
- $24,400 for married couples filing jointly and qualifying widow(er)s
These numbers represent 2019's standard deduction, so if your personal deductions are greater, itemizing makes sense. Imagine you're married filing jointly but have eligible deductions that total $26,000. At that point, you're better off itemizing than taking the standard deduction, as doing so will help you exclude an extra $1,600 from taxes.
4. Failing to report all of your income
How about those random 1099 forms you get in the mail from your bank and brokerage account? Don't just toss them aside. You need to report the income listed on those forms, however small it may be. If you don't, the IRS could flag your return for an audit, since it gets a copy of each 1099 that's issued to you.
5. Filing your taxes on paper
If you're used to filing a paper return, then you may be inclined to keep doing so. But that's a move you may regret. The error rate associated with paper tax returns is a whopping 21%, whereas among electronic returns, it's lower than 1%. As such, filing on paper means risking math errors or other blunders, including missing out on lucrative tax credits and deductions.
Another thing: When you file your taxes electronically, you'll generally get your refund in about half the time it takes to receive a refund for a paper return. And if you're waiting on that money to pay off debt or address some pressing bills, you'll no doubt want it as quickly as possible.
Avoiding the above tax mistakes could spare you a world of hassle. If you're really unsure about how to file your taxes, it could pay to enlist the help of a professional. What you'll pay in fees, you'll recoup in peace of mind.