Avoid Costly Mistakes at Tax Time

As we turn the calendars ahead to a new year, it’s time to turn our attentions to a topic that most of us would rather not think about: our income tax returns.  Whether you are expecting a refund or worried about the possibility of owing taxes this year, tax time can be a stressful time for many of us.

Ideally, our annual interaction with the IRS should be a simple affair. We spend some time digging through piles of papers trying to gather our financial records into a logical order. We tackle the countless IRS forms and confusing instructions in an attempt to understand which numbers go on what lines. After the math is done, we send off our tax returns in the weeks, day, and sometimes hours before the April 15th deadline. If we’re lucky, we’ll receive a refund check in about two months.

For some of us, however, the process is not as smooth.  According to IRS statistics, approximately 1% of all tax returns – over 800,000 each year - contain mistakes made by the taxpayer. These mistakes range from simple addition and subtraction errors to overlooking credits and deductions that could result in greater tax savings.

The IRS has identified the top five mistakes made on all tax returns:

• Incorrect or missing social security numbers
• Incorrectly calculated tax when using the tax tables
• Errors in calculating credits such as the child tax credit or earned income credit
• Entering information on the wrong lines
• Math errors

These mistakes are costly and inconvenient for a number of reasons. You could experience a delay in receiving your refund check or you may find yourself corresponding with the IRS in order to resolve your situation.

More importantly, mistakes could cost you money. Math errors could increase the tax you pay or reduce the credits or deductions you are allowed to take. Some math errors – especially those made on worksheets not sent to the IRS – will not be easily discovered.