10 common tax-filing mistakes to avoid
October 13, 2009 · Tagged with Taxes
Using the wrong tax table
It’s easy to make a mistake reading the tax tables found in the tax return instruction booklets. The print is small, and there’s a lot of data crammed on the pages. Make sure you use the correct column for your filing status.
Using any tax table could be an even costlier mistake for some filers. If you have long-term capital gains income, you’ll need to do some additional figuring to ensure you don’t overpay your taxes, since the tax rate on this money is usually much lower than regular income tax rates.
Fumbling payment procedures
If you write a check for any taxes you owe, be sure you sign it, include your Social Security number on it and make it payable to the U.S. Treasury, not the IRS.
Don’t staple the payment to your form; simply include it in the envelope. IRS examiners want to get payments into the government account as quickly as possible, even before they check the accuracy of returns. If they have to pull the check off your form, some other documents (for example, your W-2) that are necessary to complete the processing could be separated and lost.
Be just as careful if you’re getting, instead of making, a tax payment. If you have your refund directly deposited, make sure that you correctly enter your financial institution’s routing number and your account number on your return. Wrong numbers can cause your refund to be delayed or misdirected.
Forgetting to sign the return
It’s the last thing you must do when filing, but many taxpayers who send in paper 1040s forget to sign the form. The oversight could be quite costly. The IRS won’t process a tax return that lacks a signature.
If you make this mistake in February, you still have plenty of time for the IRS to notify you and then refile a signed form. But if you forget to sign a return you mail just before the April deadline, by the time you correct the oversight, you’ll be in late-filing territory, which carries an automatic penalty.
Missing the deadline
You wouldn’t think that people could overlook April 15, but it does happen. Maybe time just got away from you or an emergency arose that prevented you from filing on time.
Regardless, the result is the same: If you owe the government and don’t pay by the deadline, you’ll end up owing additional money. The IRS imposes both failure-to-file and failure-to-pay penalties. The total late-filing penalty is usually 4.5 percent of the tax you owe for each month, or part of a month, that your return is late; this accrues for up to five months. If your return is over 60 days late, the minimum penalty for late-filing is the smaller of $100 or 100 percent of the tax owed.
And remember, you’ll also owe interest on the unpaid amount.
If you just can’t get the forms completed on time, ask for an automatic six-month extension by filing Form 4868. By filing the extension, you avoid the late-filing penalty. However, Form 4868 does not extend the time to pay your income tax. So, estimate your tax bill and send that amount with your Form 4868. If you can’t pay it all, at least pay whatever amount you can. The IRS is amenable to several tax payment options.