Common Mistakes in Preparing Your Federal Taxes

Legal Reading © Stephen M. Maple 2022

With the complexity of the federal income tax code, mistakes are to be expected. This article highlights some of the most common errors to avoid.

• Math mistakes. Probably it's the calculator glitch that made the math error. The IRS lists math mistakes is the number one error.
• Using the wrong form. The IRS has a bewildering number of forms; they insist we use their form, so check their web site (irs.gov) to be sure that you have the necessary form.
• Not signing the form. The IRS does not consider the form filed until you sign it.
• Incorrect Social Security Number. If you are off even one digit on the SSAN for your dependent, he or she does not exist according to the IRS; this is easily corrected by a subsequent amendment.
• Not reporting interest or dividend income. Do not forget to include the information from your bank interest or corporate dividends (from form 1099); the IRS knows.
• Bad record-keeping. You should be able to document your income and deductions. If you are audited, the IRS will insist on seeing them. 
• Withholding too much or too little. If you have your employer withhold more tax than is necessary, you are giving the IRS an interest-free loan. If you under withhold, you may have a tax penalty; usually, this problem arises with non-employment income, such as dividends, interest and social security, so use last year tax on those items as a guide.
• Late returns. April 15 always comes quicker than we realize, but come it does, so file on time or risk a late penalty and interest. If you cannot file timely, then file for an extension (form 4868) for a six month extension to file; file this form by April 15 and pay a reasonable estimate of the tax due.
• No return. It happens but the IRS is not happy about it. The sort-of good news is that the IRS will work with you by spreading the payment for paying the back taxes, penalties, and interest. Otherwise, well, you probably will need to have a criminal lawyer on speed-dial.
• Under reporting taxable income. Frankly, someone in your neighborhood probably is cheating on his or her income taxes. Cash payments for work done is taxable but often ignored. Perhaps the neighbor won't get caught, maybe. But like most secrets, three people can keep it if two are dead; bragging to you about the cheating may get you extra income from the IRS when you turn the cheater in for your reward.
• Not seeking professional help. If your tax returns are complex, see a tax accountant.