Math errors are such a common part of the tax return that the IRS gives a full page in its annual Data Book to the types of math mistakes taxpayers make each year. But math errors aren’t the only issues that keep taxpayers from claiming all they could in refunds.
Steer clear of these 5 Biggest Tax Mistakes
- Not Claiming All Taxable Income. Sure there are types of non-taxable income, but for the most part income is taxable, that includes miscellaneous and other types of income reported on Form 1099. The IRS has examiners on staff to track Form 1099. If examiners find money a taxpayer earned and did not report, the taxpayer could owe interest and penalties, in addition to the tax that would be owed on the income.
- Transposing Numbers. It’s so easy to incorrectly input a number. Maybe you transpose two figures in your Social Security number or type an incorrect number from a 1099-INT. Taxpayers have even entered the wrong bank account number when requesting direct deposit for a refund. The refund could actually be deposited into someone else’s bank account. Taxpayers should double-check each number entered on their tax return.
- The IRS sent 1.7 million notices to taxpayers for math errors on their 2014 tax returns. The bulk of the errors were in the calculation and assessment of income and other taxes, including self-employment tax.
- Status Symbols. With five options available under filing status, the best choice for a taxpayer’s situation may not be easily determined. Each filing status could have an impact on the tax liability outcome. For example, filing under “head of household” is more advantageous than filing “single” if you are single with qualified dependents because the taxpayer gets a larger standard deduction.
- Missing a Deduction or Tax Credit. One in five eligible workers fails to claim the Earned Income Tax Credit, according to the IRS. Taxpayers who qualify for this refundable credit can pay less in federal tax or get a refund. Taxpayers need to make sure they’re aware of all the deductions and tax credits for which they are eligible. Not knowing could cost you.
To find a local Liberty Tax Service office, call 1-866-871-1040 or visit www.LibertyTax.com for more information.