Delia Law San Diego Tax lawyer

Top 5 Tax Return Mistakes – avoid an IRS RED FLAG!

Tax time is here and tax preparation software has never been so popular.  It is certainly a way of preventing tax return mistakes.   However, do not get lulled into a false sense of security.  One data error could end up costing you a lot of money and a tax audit.

IRS red flags Be sure to review your tax return carefully whether using a tax preparer, CPA, tax software or doing it yourself.  Keep these IRS Red flags in mind:

1. Inaccurate name and social security number

The IRS requires that the name on your tax return match up with the social security or tax identification number provided to you by the Social Security Administration.  This includes your spouse and children’s identification numbers.  If they are different or misspelled, the IRS will have issues with processing the return or may not process it at all unless it is corrected.

This issue comes into play with new wives taking their husband’s name or divorced women changing their name back. You first need to change your name with the SSA soon after your wedding.  This will ensure that your new name will not cause a problem when you file your first joint tax return.

Additionally, it is shocking how many taxpayers forget to insert their social security number or insert it incorrectly. It is crucial to include this as the IRS will not process your return without it.  It is also the only way to claim many tax credits including the child tax credit.

2. Filing status errors

Be sure to choose the correct filing status for your situation. You have five options:  single, married filing jointly, head of household, married filing separately and qualifying widower with qualified child.

Which one you choose and qualify for can make a difference in your tax bill.  So for example, if you have recently divorced and are a single parent, choosing “head of household” will most likely be the best filing status.

Ultimately, look into each status and what each one entails.  Your chosen status should first fit under the requirements of the law and secondly, should be the most beneficial for your personal tax situation.

3. Math and computation mistakes

Math errors are the most common mistakes found on tax returns.  It is quite a crucial mistake as it can cause you to owe more money or miss out on some or all of a tax refund.  Obviously, using tax software can help in reducing such errors due to built-in calculators, but the software can only do so much.  You must be the one to input the numbers correctly.

Make sure to review and triple check all numbers inserted into your tax return to avoid a notice from the IRS or even worse, a tax audit.  The IRS will check out all reported figures on their end from w-2’s and 1099’s to make sure it all matches up with what you report on your tax return.  If something is off, they will make the mathematical correction.  Try to avoid this happening and make sure your math calculations are correct.

Be sure all computations are correct especially when self-preparing or using a tax preparer where there are many added worksheets or forms.  When all math is inputted correctly, check taxable income, withholding, deductions, credits and estimated tax payments for computation accuracy.

4. Not reporting additional side income

It is quite common for taxpayers to forget about extra income earned throughout the year.  If you have your general w-2 job and have a side job, you must report this extra income.  Yes, it does count!  You will receive a 1099-MISC detailing these extra earnings.

Be sure to look out for other income that you must report including savings and investment accounts. You should receive a 1099-INT and 1099-DIV for these types of income.

If you forget to include these types of income on your return, the IRS will see it.  1099 income is reported to the IRS by whoever issues the 1099.  The IRS will notify you of the deficiency and you may also be subject to interest and penalties on the unreported earnings.

5. Forgetting to sign

Sign and date your return. If you forget, the IRS will not process it.  If you are filing electronically (E-file), make sure you sign using a PIN or personal identification number.  Also, if you are filing married, both spouses must sign.

Many taxpayers get into trouble with the IRS for making simple avoidable mistakes on their tax return.  Sometimes these small mistakes can result in an IRS tax audit and quite sizeable amounts of tax debt.  If tax resolution is needed, there are several options to consider, including an IRS payment plan or an offer in compromise.

The San Diego Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS.  Please call for a no-cost tax attorney consultation at (619) 639-3336. We look forward to helping you.

This blog post on IRS red flags is not intended as legal advice and should be considered general information only. We serve San Diego County.

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