The dawn of 2022 brings opportunities to create new resolutions and financial goals—and it also marks the beginning of tax season. While tax day on April 18th can seem far away, this year’s deadline will be here before you know it.
As you start gathering your tax documents and completing your return, we’ve compiled a list of the most common filing errors to look out for and avoid.
Whether you hire a professional or go it alone, avoiding these mistakes can help ensure your taxes are correct and prevent unnecessary delay or feedback from the IRS.
Tax Filing Errors to Avoid
1. Having Incorrect or Missing Social Security Numbers
The IRS processes millions of tax returns each year—roughly 160.9 million, but who’s counting?—and they need precise identifying information to address yours accurately.
Transposing numbers when writing your Social Security Number (SSN) or accidentally recording your spouse’s or children’s SSN wrong is easy to do when you’re writing or typing quickly. Try not to multitask when inputting this critical identification information. Close your email and exit out of the too-many tabs crowding your screen or papers on your desk so that you can focus on the task at hand.
Before submitting your taxes, double-check each SSN against the Social Security card to make sure all the numbers match. It may seem tedious, but trust us, it’s worth it.
2. Choosing the Wrong Filing Status
If you got married during the year (Congratulations!) and it’s your first time filing jointly, it’s easy to forget and file single as you always had. While this mistake isn’t uncommon, it can cause chaos.
Your filing status determines many aspects of your tax responsibilities, from your standard deduction to applicable credits to itemizing potential, so ensuring you select the right option is crucial. It’s essential to be aware that the standard deduction for 2021 increased to $12,500 for single filers and $25,100 for married couples filing jointly.
Because you may be eligible for more than one filing status, the best choice for this year could be different than in the past. To explore which filing status is most suitable, you can complete this five-minute survey to determine which choice fits your circumstances and will result in the lowest tax liabilities.
3. Not Addressing Life Changes
Life is full of transitions, and many of them affect your tax liabilities. When you begin to work on your taxes or meet with your tax preparer, identify any changes that impact your financial life. Marriage, divorce, and house buying are common life events to address, but the list extends much further:
- Do you have a child who started daycare?
- Did a parent move in with you?
- Did you turn a spare room into a home office?
Some changes may open you up to new tax credits or deductions, which could dramatically impact your tax situation—you don’t want to leave money sitting on the table! Take an inventory of your life in 2021, look for changes that could matter to your taxes, and discuss them with your CPA or tax professional.
4. Missing or Miscalculating Charitable Donations
Contributing to nonprofits is a powerful way to promote your values and lower your tax bill. By documenting all of your charitable donations in 2021, you will receive the maximum benefit possible.
Gather your records for all donations to qualified, tax-exempt organizations, including:
- Tax-deductible event tickets
- Household goods
- Donating appreciated assets/securities
- Qualified donations via a donor-advised fund
Remember: When calculating your donations, use the fair market value (what someone would pay for the item now), not your original purchase price.
In most cases, you have to itemize deductions to make a difference on your tax return. Still, there’s an opportunity for those taking the standard deduction to receive a tax benefit for their generosity.
The IRS extended the CARES Act provision, enabling those who take the standard deduction to deduct up to $300 or $600 if married and filing jointly in cash donations to qualified charities.
5. Making Typos
Tax returns are long and filled with massive amounts of data. Mistakes can be inevitable, especially if you have other forms or worksheets to complete along with your standard Form 1040.
Each entry creates an opportunity to make a mistake. Before filing your return, comb through your answers and cross-reference to make sure you or your tax preparer has:
- Spelled each name correctly
- Input the right numbers from each form
- Listed your bank account numbers correctly if you’re using direct deposit
Chladek Wealth’s advice: Don’t just double-check—triple-check your work. It can be really easy for eyes to glaze over all the numbers, but it’s worth the extra effort to get it right the first time.
6. Filing By Mail
Completing hard copies of your tax documents and sending them by mail is still a valid option, but the IRS recommends you file electronically. The e-file system will often find common errors in your return and reject them for you to correct them— so you can fix any mistakes now rather than experiencing potential filing delays with a paper return.
While very few people enjoy doing their taxes, if you take the time to slow down and avoid these filing errors, you can help simplify your experience and keep Uncle Sam off your back. If you have any questions about your financial life or would like advice on finding the right tax professional, we are always here to talk.
7. Not Understanding the Enhanced Child Tax Credit (or Throwing Away Letter 6419)
If you read Letter 6419 from the IRS, you can skip this section. For those that didn’t, the letter will show how much child tax credit money you received in 2021 and the number of dependents used to get that amount.
For the back story, the American Rescue Plan bumped the child tax credit from $2,000 to $3,600 for each child under age 6 and $3,000 for each child aged 6-17. Families who received advance payments will need to compare the advance child tax credit payments they received in 2021 with the amount they can claim on their 2021 tax return.
The amount of child tax credit money you receive with your tax refund will depend on how you chose to receive payments. For example, if you opted out of receiving monthly payments last year, the amount of money you will receive will likely be larger than someone who received every check.
Be Better Prepared for This Tax Season
With the 2021 tax season fast approaching, it’s time to get all your documents and data together. If you had a significant life event occur in 2021, like getting married or having a child, your taxes might look quite a bit different. What else can you do to ensure a smooth filing season? Check out some critical considerations for your tax return this year in our chart below.
We’re here to make that transition a bit easier. Dive into tax season headfirst with a trusted financial planner by your side. Get in touch with our team today!
The contents of this article are for general information and educational purposes and should not be construed as specific investment, financial planning, tax, accounting, or legal advice. Please consult with a professional advisor before taking any action based on the contents of this article. All investment and financial planning strategies involve risk of loss that you should be prepared to bear. We cannot guarantee any investment performance whatsoever, and past performance is not indicative of potential future returns.
Originally published: 2/17