The 8 dumbest last-minute tax mistakes people make
Thanks to calendar quirks, taxpayers have four extra days to file in 2017.
That doesn't mean you should wait till the end to get started. Rushing through most anything lends itself to silly, last-minute errors, and taxes are no exception.
"It's like homework," says financial planner Keith Klein of Turning Pointe Wealth Management in Phoenix, Arizona. "You can only do so much, so long, and then you get distracted."
If you're scrambling to get your taxes together at the last minute, it's easy to slip up and enter a wrong number, which can lead to even more paperwork in the form of a tax amendment or paying additional fees to the IRS.
"Often times people in a hurry are already under pressure and stress, so they aren't thinking clearly outside the moment that it's due," Brian Ashcraft, director of compliance at Liberty Tax in Virginia Beach, told Business Insider.
Below, Klein and Ashcraft share some of the dumb, last-minute filing mistakes you'll want to avoid.
1. Mixing up your federal and state taxes
Tax-preparation software and e-filing can catch a lot of errors, but you're the only one who can keep your envelopes straight. "Even if you're using apps to track your spending and software to file your taxes, you can still send your check to the wrong place," Klein reminds us.
2. Making basic arithmetic errors
Third-grade math has come back to haunt you at last. "I see people adding and subtracting wrong, putting decimals in the wrong places, or making negative numbers positive and vice versa," recalls Klein. "By simply neglecting a minus sign, you could turn a loss into a gain and owe taxes on that money."
Ashcraft says it's also common for people to transpose, or even fat finger, numbers.
"Going quickly at the last minute can change a tax return drastically," he says. "Like, if someone added an extra digit into their withholdings and thought they were getting a huge refund back."
The IRS says that most basic calculation errors are caught while processing, so you probably won't need to file an amendment if you added two and two up to five. However, if the IRS catches your mistake, it will issue a correction notice to let you know — and a request for more money if your errors resulted in your paying less than you owe.
3. Forgetting to file extensions
April 15 (well, April 18 in 2017) is not only the filing deadline for your taxes, it's the payment deadline, too. "Even if you're going to file an extension, you have to submit it with a payment," says Klein. "But some people plan on filing extensions ... and just plain forget to do it."
The IRS won't forget about your taxes. It will charge you a monthly fee of 5% of what you owe for each month you wait to file, up to 25% of your taxes. If you haven't filed by 60 days after the deadline, you'll owe a fee of either $135 or 100% of your taxes, whichever is lower.
See a guide to common tax forms:
4. Filing under the wrong name
It seems like a stretch, but it's actually not uncommon among newly married people to file with the wrong last name. "Sometimes someone will file under a married name, but hasn't legally changed it," Klein explains. When filing, you need to make sure you're using your legal name, which isn't necessarily the one on your mailbox.
5. Entering the wrong Social Security number
Sure, you know your number by heart, but even the best of us have made a typo (or filled in a three that looks a little too much like an eight). You're going to want to be extra careful when entering those nine digits, because a lot depends on your accuracy. "Your Social Security number is the key thing on your return," Klein says. "Everything is documented under it."
6. Neglecting a form
The more complicated your financial situation, the more forms you may need to submit. "Sometimes people are supposed to include another form, like an extra Schedule C for people who are self-employed, and it just isn't there," Klein says. You can find the basic forms on the IRS website, as well as a handy checklist that outlines some of the forms you might need.
The IRS says that it "may accept returns with certain forms or schedules left out," and will reach out and request a missing W-2 or schedule.
"If you make a mistake in getting your side hustle on and forget to record that income, the IRS will give you a nice reminder with a letter and a bill attached to it," Ashcraft said.
7. Forgetting to include life events
Did you buy a house this year? Get married? Have a baby? Congratulations! Now, make sure to share the joy on your tax return. "Even for people using software programs, you need to remember to input key events," cautions Klein. "Technology won't realize that on last year's return, you had two kids, and this year you forgot to add your third."
Ashcraft says people commonly get confused about the child tax credit when using software to file, which will ask if your child lived with you the previous year. Whether you had the child in the last week of December or all the way back in March, you need to mark "yes" to qualify for the credit.
However, Ashcraft said, "If the child turns 18 on December 31, you took [the credit] on the front end, not the back end."
8. Leaving money on the table
If you're crunched for time, you may overlook some of the most obvious ways to save money on your taxes.
"If you forget to save the saver's credit [for retirement contributions] or the dependent care credit, that will just be money you left on the table," Ashcraft said. Or perhaps you bought a bunch of school supplies for your child's class at the beginning of the school year. Those are easily forgotten instances and qualify as non-cash contributions, he said.
And keep in mind that you can take either the standard deduction or itemize your deductions. Ashcraft says he's seen people itemize deductions and then mistakenly check the box later for the standard deduction when e-filing, meaning they won't be saving the money they expected to.
How do you keep from tripping up — and potentially paying up?
According to Klein, there's nothing better than a second pair of eyes. "The reality is that there's always a benefit to having someone take a second look at your return, whether that's a husband filling it out and a wife checking his work, running it through a tax-prep program, or seeing your CPA. Even really good CPAs use software to double-check their work."
While filing an amendment isn't the end of the world, Klein says, you don't want to give the IRS another reason to comb through your return. "Any time you open up a can of worms, you never know what might happen," he reminds us. "But if everything's on the up and up, it will all work out well."
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