The error rate on paper tax returns is 21%, and only 0.5% for electronically filed tax returns. It seems a no-brainer that the first step in reducing errors with filing taxes is to file electronically.
However, there are still common tax errors made each year that can result in heavy charges or missed opportunities to save money.
Check out these 4 common return errors and how to avoid them.
1. Filing Tax Returns Late
This is a common and easily avoidable error that can end up being a costly one. Filing tax returns late happens because of a lack of preparation and prioritization or unforeseen circumstances. In the case of the latter, it’s important to request an extension as soon as you can.
Avoid missing your tax deadline and the charges that come with it by planning ahead. Make sure you know when taxes are due and give yourself enough time for tax season preparation.
2. Math Miscalculations
Arithmetic mistakes in tax returns are astoundingly common but just a bit of bad math can reduce your tax refund or lead to a nasty surprise of owing more than you thought. These sorts of errors include addition, subtraction, and multiplication errors as well as mistakes in transferring figures.
Using a tax software program is the easiest way to avoid these errors. These programs have built-in calculators and flag math miscalculations for you.
3. Filing With an Incorrect or Misspelled Name
This happens more than you think and is an easy error to make — especially if you’re newlywed or don’t check over your returns before filing. It’s important that the name and Social Security number match. If they don’t, your return may be denied or the process unnecessarily delayed.
Again, this error is easily avoidable. Make sure to double-check your return to identify mistakes and notify the Social Security Administration if you undergo any name changes.
4. Not Taking Advantage of Tax Deduction Opportunities
Do you know your eligibility for tax deductions and credits? If not, you should make it a priority to find out. There are many tax-saving opportunities that you could be benefiting from such as home office education or credit for child and dependent care.
Reduce your tax bills by reviewing all the possible tax deduction opportunities and whether you’re eligible for any of them. Make sure to take the time to itemize the deductions rather than choosing the standard option. It might take longer but it’s well worth it.
A tax preparation service can advise and assist with deductions. For more information about all things tax-related, check out the guide to financial modelling.
Reducing Errors With Filing Taxes
These common errors with filing taxes are easily avoidable and will cost you a lot of money if not mitigated. Give yourself enough time to prepare for tax season, seek professional advice when necessary and be sure to take advantage of deductions.
Now that you know how to avoid these tax errors, why not get ahold of your personal finances? Our site is packed with content to inform and educate concerning financial matters. Keep exploring for more articles!