Updated: Oct. 15, 2019
Millions of taxpayers who got an extension to file their federal and, in many cases state, tax returns are crashing to finish those forms today, Oct 15.
Time definitely is short, but don't panic.
As you work on your Form 1040 — new, but not necessarily improved under Tax Cuts and Jobs Act (TCJA) changes — in these closing hours of your six-month extension, make sure you don't make any of these common filing errors in your rush to finish.
For the most part, tax software has helped eliminate a lot of mistakes. Still, we're not yet at the total tax automation point yet. And that old garbage in, garbage out adage about computer data definitely applies to tax returns.
In fact, it's more critical, since one wrong tax entry could be multiplied across several forms or schedules, producing a costly tax error.
So that you won't end up in such a situation, check out these 10 common tax mistakes that millions of taxpayers make every year. Some are directly from the Internal Revenue Service. Others are based on my and other filers' experiences.
1. Missing or inaccurate Social Security numbers: This nine-digit number was not intended to be our universal identifier, but, for better and in this age of identity theft often for worse, that's what the Social Security number has become.
There's been some talk about changing that for tax filing, but until that happens, you've got to include it on your annual return. The IRS won't process a 1040 without it. This identity number requirement extends to you as the primary filer, as well as the Social Security numbers for your spouse and any dependents.
These numerals are crucial because so many tax-related transactions, from income statements to investment earnings to retirement plan contributions and distributions, are keyed to this number.
A Social Security number also is critical when claiming several tax credits, such as the child tax and additional child tax credits, as well as ones for educational expenses and dependent care costs.
When you run your final tax software check, it should point out any missing Social Security numbers. But what it won't know is whether the digits are correct. So double check. A wrong tax ID number, when checked by the IRS against other data it has on you, will at best slow down the processing of your return. At worst, it could cost you valuable tax breaks.
2. Misspelled or different names: Sure, the bulk of the information on your tax return is numerical, but words — specifically names — are important, too. Spell all names listed on a tax return exactly as listed on the taxpayers’ Social Security card.
What's the big deal if you've gone by a middle or nickname all your life and enter that on your Form 1040? Plenty. When the names of a taxpayer, his or her spouse or their children don't match the tax identification number that the Social Security Administration has on record, the IRS processing machine likely will kick out or slow down the tax return.
Name issues often are a problem for the newly married. Many folks still change their surnames when they marry, whether the "I do's" are exchanged by a bride and groom or spouses in same-sex marriages, which the IRS now recognizes.
In these cases, if you didn't alert the Social Security Administration (SSA) of your name change after your wedding, your new name on your 1040 or other tax statements could cause a problem when you file your first joint tax return. Get in touch with the SSA ASAP to reconcile this.
The same issue also arises when marital bliss doesn't last and ex-spouses change names after a divorce. Again, make sure Uncle Sam's appropriate agencies know that, too.
3. Improperly claiming a dependent: Sometimes determining just who is your tax dependent can be messy. There are lots of rules about relationships and support earned or provided and who lives for how long in your house. You also must have the Social Security number of the person (see #1), either a child or qualifying relative, you're listing as a dependent on your tax return.
Sometimes the eligibility confusion leads to an innocent mistake as to who can be listed as your tax dependent. Other times, though, folks knowingly claim a person as dependent to get a tax break, such as the refundable Earned Income Tax Credit.
Faking dependents is not a good idea. This is willful disregard of the tax laws and your responsibility to meet them. Such intentional tax violations could lead to tough penalties, sometimes of the criminal nature, on top of the unpaid tax and interest added to it that you thought you were escaping with your fake dependent ploy.
Think the IRS might be too busy to catch your suddenly larger family? Think again. The IRS knows that filers sometimes add people, either real or imaginary or even pets, on their returns. That's why tax examiners look at who has and hasn't been listed before on your returns.
4. Using the wrong filing status: Some taxpayers unintentionally claim the wrong filing status. That innocent error could be costly, such as choosing single in the first tax-filing season since your divorce when you have primary custody of your children and really should be filing as the more tax-beneficial head of household.
Filers have five filing status options, and each could make a difference in your ultimate tax bill.
The IRS' online Interactive Tax Assistant can help you pick the proper filing status. E-file software also helps prevent mistakes here.
5. Using whole, rounded numbers: Yes, round numbers are easier to add and subtract.
Yes, your tax software rounds entries.
And yes, even the IRS says you can round your dollars and cents on your Form 1040 entries.
But when it comes to deductions and business expenses, it tends to make the IRS think that you're, uh, making up amounts.
OK, I tend to add tip amounts so that business meal checks come out to even numbers. But I have those receipts to support my OCD.
Other financial transactions, however, rarely end in .00.
At best, all those rounded numbers make it look like you didn't keep good records showing precise amounts. And that could encourage the IRS to take a closer look at all your entries.
6. Entering incorrect bank account numbers: You can have your tax refund directly depositing into a bank account or accounts or retirement plan. That's easy for you and the IRS. Unless you enter the wrong account number and accompanying routing number.
The more numbers you enter on a tax form, the more chances you have to enter them incorrectly. And a wrong account or routing number could cause you to lose your refund entirely.
You can divide your refund deposit into three accounts by filing Form 8888 along with your individual return. It's not a difficult document to complete, but if you put in wrong account numbers, your refund could end up in someone else's account or be sent back to the IRS.
Incorrect account numbers aren't just a problem when a refund is split multiple ways. Even if your refund is going to just one account, make very sure you enter that account and bank routing numbers correctly.
7. Overlooking additional income: Did you have a side job this year? If so, as a contractor you probably received a Form 1099-MISC or maybe a 1099-K detailing the extra gig earnings.
What about savings and investment accounts? For these, you should have received Form 1099-INT and Form 1099-DIV statements.
In these 1099 situations, the IRS knows precisely how much extra money, either as wages or unearned investment income, you made because it got copies of those forms, too.
If you forget to include any of these earnings on your return, IRS examiners will let you know you that it knows and that you owe taxes on that money, too. And depending on when your oversight is discovered, you also could owe penalties and interest on the unreported earnings.
8. Making credit or deduction mistakes: Here's a non-news flash. The tax code is complicated. In fact, many of the changes made by the TCJA have, say many tax professionals and filers, have made things worse in this regard instead of better. That means there are lots of opportunities to make mistakes as you look for tax-saving credits and deductions.
Errors are frequently made by folks claiming two popular tax breaks, the additional child tax credit. Both of these credits are refundable, meaning they can get you a refund even if you don't owe any tax. That's part of the reason the IRS now must hold refunds related to these tax credits until mid-February.
But the IRS also sees each year errors by filers figuring their child and dependent care credit and even in selecting their standard deduction amount. For example, a taxpayer who's 65 or older and/or blind, can claim a larger standard deduction.
Follow the tax filing instructions carefully, either those in IRS publications and forms or as part of your tax software. Again, the IRS' online Interactive Tax Assistant also can help you determine if you're eligible for certain tax credits or deductions.
9. Math miscalculations: The IRS is all about the numbers. So it's no surprise that the most common error on tax returns, year after year, is bad math.
Arithmetic errors range from simple addition and subtraction to more complex tax items, like those credits and deductions just mentioned in mistake #8. Figuring things like the EITC or the taxable portion of a retirement account distribution, for example, is more difficult and results in more math errors.
The IRS' 207 Data Book, the latest available edition, shows that in processing 2016 tax returns, the agency caught more than 2.5 million math errors. Considering that most of us use tax software, in large part because it does the math for us, that's astounding.
Source: IRS 2017 Data Book
Again, the garbage in, garbage out factor comes into play here. The wrong number on one form's line produces a wrong calculation that gets transferred to another form, exponentially compounding the math error.
So pay close attention when you enter your numerical data into your tax return.
10. Missing the deadline: Finally, don't make the biggest tax season mistake of all, missing the filing deadline.
You and millions of your fellow tax procrastinators did the right thing earlier this year when you realized you couldn't properly finish your returns and officially put off filing until now.
You also sent the U.S. Treasury a close estimate of any money you figured you'd owe when your finally did the calculations. But if you weren't quite close enough, interest has been running on the shortfall.
Figure our your final tax bill and get it and your 1040 to the IRS today. If you don't, you also could face late-filing or non-filing penalties.
Nobody wants to pay Uncle Sam a penny more than necessary, so don't make the mistake of missing the ultimate tax-filing deadline. Or any of the 9 other potentially costly return completion errors.