With the tax season around the corner, there will be lots of sleepless nights accompanied by sweaty palms. Not all of us are math geniuses and filing the income tax can be a grueling task if you aren’t familiar with the nuances of income tax filing. Hiring a tax preparer can be a costly affair, but the latest income tax preparation software programs are quite efficient in helping you file your income tax. Though these tax preparation software programs have reduced the number of mistakes people usually make while filing their taxes, you are still one step away from making a trivial mistake. This insignificant error can transform into a hefty tax bill or smaller refunds.
So, even if you are using a tax preparation software to calculate and file your income tax, there are certain slippery slopes you need to avoid. Take a look at some of the most common income tax related mistakes, and ensure that you don’t repeat these.
Mathematical errors are the most common mistakes people make each year while calculating their income tax. While adding figures or transferring them from one schedule to another will make you the recipient of an immediate correction notice. Though using a tax software program can dramatically reduce the math errors as it has an in-built calculator that adds, subtracts, and inserts numbers on additional forms as required, you still have to ensure that the initial numbers are correct. Small mistakes like reversing the numbers can make a lot of difference in the amount of income tax you have to pay. As the Internal Revenue Service (IRS) double-checks your numerical entries against the copies of the tax statements, you need to corroborate that numbers are correct.
Misspelled or different names
Numbers are vital in tax forms, but so is your name. People often make spelling errors while writing their names, and if your and your spouse’s name don’t match the tax identification number that the Social Security Administration (SSA) has on record, the IRS will halt your income tax filing process or slow it down. Such instances occur mostly with newly-married women who change their surnames after marriage. It is imperative that you alert the SSA immediately after your wedding to ensure that you do not face any problems while filing your tax return.
Dangers of direct deposit
Taxpayers have the option of having their tax refund deposited directly into multiple bank accounts. Though this is an excellent way of saving your refund money, this implies that you will have more numbers to enter in your tax form. Which, in turn, can easily culminate into mistakes like a wrong account number or routing number. Such mistakes might appear inconsequential, but this can result in you losing your entire refund money. Even if you aren’t splitting your refund into multiple accounts, ensure that you double-check the account and bank routing numbers that you will be submitting.
Blunders in charitable contributions
The charitable contributions you make throughout the year impact the amount of income tax you pay. One of the most common mistakes people make while filing their taxes is that they do not include all their charitable donations. All types of donations—cash to cars—function as valuable tax deductions. Which is why you need to ensure that you count all of these. Also, follow the donation tax rules, especially the one which state that the donation is made to a qualified organization that has tax-exempt status with the IRS.