Top Tips for Tax Season: Avoid These 10 Mistakes

Tax season is saturated with stress, whether it’s because you know how much it's going to cost you or because you aren’t well-prepared for the complexity of filing. It’s safe to say no one likes tax season…unless you’re expecting a tax refund from the IRS.

Three of four taxpayers, in fact, receive a check from the IRS after they file their tax return. But according to tax specialists, this year could be different – those expecting some kind of tax refund could be receiving a much smaller amount than what they typically receive.

Regardless of whether or not you’re expecting a refund from the IRS based on your income bracket, it’s important to know that even the smallest errors made on your tax filing can be costly! Surprisingly, common mistakes taxpayers make on their tax return are often simple, but they can be costly.

Although paying taxes during the COVID-19 pandemic has been far from simple, here’s some solid advice to protect your money and your peace of mind this tax season.

1. Start your tax prep ASAP.

Taxpayers have experienced many changes over the past two years. For instance, new tax implications such as stimulus payments or pandemic unemployment can throw taxpayers for a loop. The sooner you start preparing your tax return, the better. It’s entirely possible that your finances have drastically changed since the last time you filed.

Start your prep sooner rather than later to avoid finding yourself between a rock and a hard place with a hefty tax bill.

2. But don’t jump the gun.

If you file your tax return early, it’s possible you’ll get your refund even earlier than you had anticipated. But if you file too early, you risk making mistakes in the process that require you to amend your tax forms down the line. It can also result in an unnecessary processing delay.

The earliest date you can file your taxes this year is January 24th, 2022. You can see the whole calendar of tax related dates here.

3. …and don’t wait too long.

On the other hand, if you wait too long to file your taxes, you risk hitting the tax deadline. This year, the tax deadline is April 18th, 2022. Even though you can file for an extension, you’ll still need to pay any taxes you owe by the 18th. Resist the temptation of procrastination because if you wait too long to file your return, you might be charged with a monthly failure-to-pay penalty as well.

Whatever you do, don’t avoid filing, even if you can’t afford to pay your dues in total right off the bat – the IRS can work with you to start a payment plan.

4. Save key tax materials as they arrive.

It’s incredibly tempting to toss your mail aside and forget it exists or assume it’s just another piece of junk mail. Don’t! Especially during tax season, because it’s possible you’ll throw out key tax materials like your W-2 or 1099 as they arrive in your mailbox.

5. Sign all forms.

Did you know the IRS is still working on returns from prior years? If you don’t sign and date your tax forms, it’s likely you’ll run into some kind of issue with your paperwork…and you won’t have a solid timeline of when that will be resolved. Don’t forget to sign and date each form, even if it’s an electronic signature through digital filing.

6. Double check your math.

Any kind of numerical error, no matter how small or large, can set you up for penalties by the IRS. For example, swapping numbers around or accidentally embellishing your income are math mistakes that can be costly. Be sure to re-check the numbers on all your applicable tax forms for accuracy before submitting.

7. …and review your spelling.

Misspelled names are more common than you’d think on tax returns. To make sure you’re aligned with all of the information you’re reporting, check the spelling against your social security card, bank account, and other tax forms. Always review your address as well for grammar and spelling mistakes that might’ve been overlooked.

8. Make sure you don’t miss tax breaks.

Tax breaks come in the form of tax credits and deductions. Just because you’re not aware of what you’re eligible for, doesn’t mean you can’t do some research! Think about if you have any dependents (children), if you’ve donated to charities, and other ways you could be eligible for money-saving opportunities with your taxes.

9. Be sure to enter the correct bank information.

There are a variety of ways to receive a tax refund if your return allows for it. You can actually set it up so your funds are deposited directly to your bank account, so long as you accurately transcribe your routing and account numbers. Fortunately, there’s a bit of a fail safe here in that the IRS will send you a paper check instead of the direct deposit if it’s not processed correctly. You can also track your tax refund to make sure it doesn't get lost.

10. Consider using an expert.

Even though using a tax professional or the best tax software might cost you some money upfront, it could be worth it in the long run to use an expert in order to ensure your tax return is prepared properly. Your taxes can be complicated, especially from 2021 where they are impacted with pandemic-related payments of new cryptocurrency taxes, for example. If you freelance or have several streams of income, it might be beneficial to have someone else look over the numbers so that your books are aligned and you get the most out of your refund.

While your financial situation might change from year to year, the process of filing your taxes doesn’t. Cover your bases and get prepared for tax season early!