10 Tax Filing Mistakes to Avoid

Alden Wicker
Posted

We know why you’re here.

It’s OK–fearing tax season is perfectly reasonable because when it comes to deductions, credits and filing status, there’s a lot to learn–and mess up. (Don’t shoot the messenger! Write to Congress!)

Our goal is to keep you far away from IRS auditors, while making sure that you pay as little as (legally!) possible. We’ve broken down the top mistakes you should avoid point by point–translated from IRS speak–so you can sleep soundly at night.

1. Don’t … Keep Poor Records

Unless you have devastatingly simple finances (no real estate property, one salaried job, simple or no investments, etc.), then you’ll need to keep yourself organized for tax season, so you’re not left scrambling to find documentation or fudging the numbers on your return–that can set you up for an audit!

What to do: Make sure you have easy access to all of these records from the past year:

  • Government confirmation of your return and refund from last year. Order a return transcript from the IRS.
  • Records of charitable donations, including receipts. Charitable organizations often send out a year-end summary of how much you donated. If yours doesn’t, contact them to request a receipt or use bank statements or cancelled checks.
  • Large medical or dental bills
  • Records of business or job hunting costs
  • Forms from your job(s) showing how much income you’ve made. You can request documentation of your salary from your HR department, if they haven’t sent it to you already. (If you have a full-time job, that will be your W-2. If you freelance, you’ll need 1099s from each client.)
  • Purchases, sales and improvements to real estate property
  • All actions in your investment and IRA accounts. Most online brokerages will keep records for you–just log in to download your documents.

Better yet, get yourself into a paperless filing system, such as linking your accounts in LearnVest’s Money Center, so that you have a searchable database of transactions and donations.

130201kc-pinterest

2. Don’t … Pay for an Accountant You Don’t Need (or Fail to Get One When You Should)

If you have simple finances–you are a salaried employee, and don’t hold complicated or high volume investments, for example–all you need is a couple of hours to do the job yourself through an online filing program. (Bonus: You’ll save yourself a few hundred.) But if your finances are complicated, you risk losing out on deductions and credits that could make paying a professional worth it.

What to do: If you think that you should probably have an accountant, ask friends and family for a referral or visit AICPA.org to search for an accredited accountant. Just be aware that you may be charged more for a rush job. If you cannot find one at the last minute, take our Ace Your Taxes Bootcamp, and make full use of our tax resources in the Knowledge Center to answer any questions.

3. Don’t … Choose the Wrong Filing Status

Your filing status (single, married filing jointly, married filing separately or head of household) determines how you treat many tax decisions, such as what forms you’ll fill out, which deductions and credits you’ll take and how much you will pay (or save) in taxes. Select the wrong status, and it will trigger a cascade of mistakes–maybe even an audit. On top of that, if you decide to file jointly with your spouse, this means you’re responsible for any errors or deliberate falsehoods on your partner’s return, so make sure that you’re comfortable with what it says.

RELATED: Pleading Innocent: When Your Husband Is a Financial Criminal

What to do: Use our filing status flowchart to decide which status is right for you. If you’ve already filed with the wrong status, submit an amended return.

  • HOLLIE MK

    I HAVE QUESTION ON FILING STATUS.  MY HUSBAND AND I FILED SEPARATELY LAST YEAR, AND THIS YEAR WE WERE PLANNING ON FILING TOGETHER. IS IT BAD TO SWITCH BACK.

    • PG

       You can switch all you like (at least for your Federal return) but you should do an analysis to see whether it is better.  Generally it is better to file jointly (the tax rate brackets are more optimal and you aren’t as restricted with certain deductions) – is there any particular reason you filed separately last year?

  • Pam

    I am widowed from my husband in 08, we have one child we adopted and I am disabled. 
    I have been told that I did not need to file taxes as the only income is my social security. 
    But I also have my son who is adopted and I receive a stipend from the state so I cannot 
    collect the Child Allowance.  I have not filed any taxes since my husband passed but I have all the paperwork and I have gotten a mortgage modification.  I have never gotten a unified vote on the legality of filing or not filing but I have made mortgage payments for five years and I don’t know how much of that I can claim.  (No PMI).  In thanks.  

  • Richard Yaffee

    This was an interesting article. As a CPA, I must say that all my
    clients who contact me would make mistakes with their taxes. That is why
    they contact me and why I have a job. That being said, you did a good
    job of highlighting common mistakes made by people who prepare their own
    returns.
    http://ctssac.com/

  • R. Yaffee

    I love articles with tax tips. This can be a difficult area to grasp for
    many of us (I know it is for me!) and the help is greatly appreciated!

    http://ctssac.com/