The Three Most Common and Costly Errors Made by Tax DIYers
It is estimated that at least 20 percent of Americans wait until the final week before taxes are due to file their returns. Often, these same individuals have the most complex tax issues, which means they are more likely to file their complicated returns in a harried state of duress.
Not surprisingly, these eleventh-hour returns also are the ones containing the most errors. And errors are costly; not only do you typically get back less than the full amount to which you were entitled, you also might find yourself penalized for not paying enough.
While using an inexpensive tax software program can save you a few bucks, it is important to remember that software cannot protect against human error, such as entering incorrect data or failing to understand the complexities of how a new tax law might adversely affect your return. Understanding all the details of the Affordable Care Act is tough enough; trying to figure out how to apply its new mandates and decrees to your 1040 filing can be downright painful.
Taking your tax information to a professional is almost always worth the little extra you pay. A fresh set of professional eyes will ensure that your return contains none of the following common tax return errors:
- Math and Computation Errors:
If you enter $1,600.00 into a tax software program when you should have put $6,100.00, neither you nor the government will be happy with how your tax form looks. Believe it or not, “little” transposition errors like this can cause people to pay penalties and/or delay monies owed.
- Direct Deposit Mistakes:
Yes, it happens. People see others enjoying their extra money from tax season, but wonder what happened to theirs. Alas! Their return went to the wrong account. The really sad news: enter the wrong account or routing number and you could lose your return entirely.
- Incomplete or Wrong Information:
So, where is your tax return? It probably was not completed entirely. Perhaps key information was illegible. Have you recently been married or divorced? If so, it might be possible the wrong name was entered on the return? According to experts, the people that wait until the last minute to file are usually the ones who forget to sign the form; and, yes, this means no return is forthcoming. Filing under the wrong status, or checking more than one status is another common input mistake. Remember, there are five different filing statuses, so rubbing minds with pro is a good idea to make sure you chose the one that fits your situation best. Did you forget to enter your tax ID number? Forgetting that number is also a common mistake, and key credits–including child tax credits, educational expenses and dependent care costs–cannot be claimed without that nine-digit tax sequence.
Take it to a Pro So You Know
What is your time really worth? Do-it-yourselfers often find the biggest benefit of having a professional tax advisor handle their returns is the time they save in not having to make calculations, enter figures or sort through forms.
There are many ways a tax return can go awry, especially with those who wait until the last minute. So, think carefully before buying inexpensive tax software. It may not be the wisest investment of your money or your time.