Here are 10 of the most common tax mistakes made on income-tax returns, according to the Internal Revenue Service. Tax mistakes can delay processing of your return and mailing of your refund, and lead to more serious problems such as audits.
1. Failing to Sign and Date Return
It sounds so simple, doesn't it? And yet, year after year, one of the most common tax mistakes is forgetting to sign your tax return. The IRS does not accept tax returns that are not signed. And remember: Both spouses must sign a joint return.
2. Checking Wrong Filing Status
Another common tax mistake is choosing the wrong filing status. You have five choices: single, married filing jointly, married filing separately, head of household and qualifying widower. Taxpayers often incorrectly claim head of household filing status without meeting the requirements.
3. Messing up Social Security Numbers
Here's another easily avoidable tax mistake: The names and Social Security numbers for the taxpayer, taxpayer’s spouse, dependents, and children who qualify for the Earned Income Credit or Child Tax Credit must be included on the return exactly as they appear on the Social Security Cards.
4. Failing to Report Income
According to the IRS, taxpayers often make the mistake of failing to report income that's not including on a W-2 or 1099 form such as rental income or self-employment income. If you forget to report that type of income, it may cost you in the long run. The IRS can assess interest and penalties.
5. Using the Wrong IRS Form
There are so many different kinds of tax forms it's easy to understand why this is among the most common mistakes. Take care to review the instructions on all forms and schedules to make sure you're using them correctly and accurately.
6. Claiming Inelegible Dependents
A qualifying dependent can be a child or a relative, but never your spouse. To claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year.
7. Overlooking the Earned Income Credit
The Earned Income Credit is designed for low- to moderate-income working individuals and families. Congress approved the tax credit in 1975 in part to offset the burden of Social Security taxes and to provide an incentive to work. Both your earned income and adjusted gross income needs to be within certain ranges for you to qualify.
8. Failing to Pay and Report Payroll Taxes
If you hire household workers such as a house cleaner, an in-home caregiver, or a nanny, you must pay and report payroll taxes beyond a certain income threshold.
9. Forgetting About the Alternative Minimum Tax
Federal tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain kinds of expenses. The alternative minimum tax is an attempt by the IRS to ensure that anyone who benefits from these tax advantages pays at least a minimum amount of tax, according to the government.
10. Failing to File a Return
Yes, it seems silly to even bring this up. And yet many Americans make this tax mistake. Even if you don't owe taxes to the government, you've still got to file a return if you earned an income. And if you are due a return? Bad news: Taxpayers forfeit refunds if they don't file returns within three years.