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10 Common Tax Mistakes That Could Cost You

10 common tax mistakes that will cost you - TaxAct Blog

The U.S. tax code is nearly 4 million words. That’s a lot of complicated tax jargon.

However, even though the rules are complex, most of the mistakes taxpayers make on their returns are fairly simple.

Here’s a list of the 10 most common tax mistakes and how to avoid them.

Not filing on time

The IRS estimates 20 percent of taxpayers wait until a week before the  deadline to file their income tax returns. Unfortunately, waiting until the last minute can force some procrastinators to miss the deadline if they run into any problems while completing their forms.

While filing for an extension will give you more time, you still need to pay any taxes owed by the deadline, which is April 18, 2017 for tax year 2016.

If you don’t make the payments by the due date, the IRS will charge you interest.

Missing or incorrect information

One of the most common tax filing mistakes is leaving a box blank or fat-fingering your Social Security number.

The easiest way to avoid those mistakes is to import last year’s return so you don’t run the risk of a typo when manually keying in your information.

Math errors

The formulas on tax forms are notoriously tricky: “Add line 8 to line 32 and multiply by .356 if your AGI is greater than $50,000.”

Save yourself a headache and use tax preparation software that does the calculations for you. With TaxAct, all you have to do is answer a few simple questions, and the software will populate the numbers in the appropriate box on your return.

Falling behind on the latest tax news

Not only is the tax code complicated, but Congress changes it every year.

Make sure to consult the IRS news page, or subscribe to the TaxAct Blog for important updates so you don’t miss out on valuable deductions or attempt to claim a deduction that’s been phased out.

Not keeping a copy of your return

Tax experts recommend keeping a copy of your tax return for at least three years. Tweet this

That’s how long the IRS can legally audit you for gross under-reporting of income.

Luckily, you can review and print your 2016 TaxAct return for seven years after filing access for free.

Inaccurate account numbers

You should always double check your bank account and routing numbers if you want your refund direct deposited or if you’re making an electronic tax payment.

Entering incorrect information can delay your refund or result in penalties and interest on late payments.

Missing a tax break

While the IRS isn’t famous for its generosity, there are a number of tax credits and exemptions available – especially to families and students.

Credits like the Child Tax Credit can lower your tax bill by as much as $1,000, so make sure you don’t miss out if you qualify.

Make sure you think twice before deciding to take the standard deduction. Homeowners in particular should itemize their biggest deductions to see if they add up to more than the standard amount.

Filing the wrong tax forms

The IRS offers three different income tax forms: 1040, 1040A and 1040EZ (the differences between each form is explained here).

If you want to itemize deductions, for example, you can’t use the simplified EZ version because you need to include a separate Schedule A.

The same is true for reporting profits and losses from a business. In this case, you need Schedule C.

Filing under the wrong status

The IRS applies different income tax rates and awards different standard deductions according to your filing status: single, married filing jointly, married filing separately, head of household or qualifying widow(er).

Married couples filing jointly, for example, are entitled to twice the standard deduction of single filers.

Also note that married couples filing separately are subject to different rules than joint filers.

For instance, if you file separately, both spouses need to claim either the standard or itemized deductions, but not one of each.

Use this tax bracket calculator to find out which tax bracket you are in and estimate your 2016 tax rate.

Not filing at all

Even if you can’t pay your full tax bill at the time it’s due, file a return and contact the IRS to start an installment payment plan.

The interest rates are low, and it’s far better than failing to file, which can result in penalties and potential tax evasion charges.

TaxAct makes preparing and filing your taxes quick, easy and affordable so you get your maximum refund. It’s the best deal in tax. Start free now or sign into your TaxAct Account.

Comments

  1. I have used TaxAct for many years now and it never disappoints. Sometimes my returns are relatively complex (Schedule K/ S Corp., etc), but TaxAct always has the form and answer needed. Thanks!

  2. Quite a few Taxpayers do not realize or understand that when they decide to file Married Filing Separate,(MFS) instead of Married Filing Joint (MFJ), they loose out on several credits etc. In most cases it is more advantageous to file MFJ

    Some taxpayers also do not understand the difference between Head of Household (HOH) and MFJ.

    • If you click all the boxes in Tax Act software correctly, it will guide you to the correct Filing Status to use. I like the feature to compare the results under MFS and MFJ with just answering a few additional questions that is built in the Tax Act software.

  3. My husband passed away on October 17, 2016. We always filed jointly/married – what is my filing status for 2016. Married or widowed? Thanks.

    • Hi Patricia! We’re very sorry to hear about the passing of your husband. When it comes to filing your taxes, you’ll want to file as married for TY 2016. Thank you!

  4. how do I file for a energy (installed solar panels) tax credit using TaxAct?

    • Hi Harold! Under the credits section with our product you will find the Residential Energy Credit. This is where you can fill in your information to receive the credit. Thank you!

  5. Have used TaxAct longer than I can remember. Website is easy to navigate in a timely manner. No problem with refunds. Very satisfied.

  6. I drive for Uber. This is my first year driving with them so I have not yet filed with them on my record. Can I write off my miles, gas, oil changes, etc.

    • Hi Jeremy! Yes, you can write off any expenses related to your Uber business. As far as the mileage is concerned, you can either claim the standard mileage rate or keep track of all miles/expenses and report your exact numbers. If you file with TaxAct, we help you do this to ensure you are maximizing the situation. Thanks!

  7. David Benny says:

    I’ve been using tax act for several years. Went to CPA when I retired, and he just copied the numbers from tax act forms I had already made out. Charged me $150. Great idea to have free access to records for seven years. Always worried about trying to copy them to CD which didn’t always work. Thank you for a great service.

    • Good! We’re glad to hear you approve and to help you out! Tax filing can definitely be affordable! We’re glad you’ve chosen us as your tax preparation partner.

  8. Question? If someone doesn’t have earn income, but owns a home and pays taxes on that home. Is disabled,only income from SSD. Can they file a return?

    • Hi Mary! In this case, the person can definitely file a tax return, however it may not be required based on income level. Thanks!

  9. I’ve been retired for 10 years and have a small graphics business (less than $2000 per year). The rest of my taxes are very simple, just Interest income. A Schedule C used to be provided in the basic package, which is really all I need, but now it’s only offered in the upper end business package. Maybe consider offering the Schedule C as an add-on, or just put it back in the basic package ? Other than that, I kinda look forward to doing my taxes with TaxAct.

    • Hi Carson! We appreciate the feedback and suggestions. We’ll pass along to our product team for consideration. Thank you for being a TaxAct customer!

  10. Barbara Cyrus says:

    Hi, I have been using Tax Act for about 5 years, from recommendation of a family member. Before this I knew NOTHING about how to file taxes! They make it very simple and easy to use. I figure why pay someone else hundreds of dollars when you can do it with Tax Act for just a few dollars!

    • That’s our point exactly, Barbara! You shouldn’t have to pay and arm and a leg to do your taxes – plus you can learn so much doing them yourself! Thanks for being a customer!

  11. I have been using TaxAct for many years. I wondered how well they would do with my retirement pension income. TaxAct knew about an automatic deduction due to federal law enforecment retirees. A friend, who is a tax attorney, didn’t even know about this! I will remain a loyal user.

    • That’s what we’re here for Patti! Always happy to help ensure you’re taking advantage of the tax benefits available to you! Thanks for being a customer! Let us know if you have any other questions!

  12. Keria Burkhalter says:

    It’s like Taxes for Dummies. Come on, you’ve seen the yellow books that I’m referencing. It’s a great system to use and inexpensive. A few friends told me about it and I’ve been hooked ever since. I’ll probably “do our taxes” for the rest of our lives because I don’t trust anyone else to do them right.

  13. I am single head of household full time employed & taking care of my full time online high school 20 yr. Old daughter & 19 mo. Old grand daughter. My daughter made less than $2,000 this year working. How is best to file?

    • Hi Alisha! In order to give an accurate suggestion, we would have to know more details about your situation as there are many things to consider in your scenario. For now, our best suggestion to determine who you should claim as a dependent on your tax return is to use our Dependent Assistant available in our products. This will guide you through a series of questions to help you figure out if your daughter or granddaughter meet the dependency qualifications. Simply register to start a return using the product that best fits your tax situation and you can access the assistant tool. Thanks!

  14. Jason M. Kibby says:

    My tax returns with rental property are mid-complexity, and TaxAct has become among my best friends. I have the advantage of saving money, the ability to rely on a strong product, archive of the end result and a user experience which is commendable and continually improving.

    I have absolutely no reason to consider alternatives to TaxAct, trust the product and can report exact 100% satisfaction with every aspect of this service.

    • That’s awesome to hear, Jason! We definitely enjoy helping you get the most out of your taxes. Thank you for being a TaxAct customer! Please let us know if you ever need any help.

  15. Can bartenders and strippers file taxes

  16. Do I have to file if my only incongruous was school loans

    • Hi Angier, Student loans are not considered income so they do not need to be reported on your tax return as such. Thank you!

  17. My wife and have been taking care of our granddaughter since January 2016. She has been in the custody of the state but in our care the entire time. We have provided all of her upbringing and care and my wife has been unable to work because of this. According to what i’ve read I can claim my granddaughter as a dependant. I’m curious if I can claim my wife as a dependant also?

    • Hi Chris, You cannot claim your wife as a dependent. Instead, you’d want to claim an exemption for her and file jointly in order to get the most tax benefit. As far as your granddaughter is concerned, the best way to determine dependency eligibility is to use our Dependent Assistant tool in our products. This will walk you thrugh a series of questions to help you figure out if your granddaughter meets the dependency qualifications. Thank you!

  18. Another highly satisfied customer here. Been using TaxAct for a long time (can’t recall when I started, but well over a decade) and never experienced any problems. Tried another service/program once, about 8 or 10 years ago, and that was enough to convince me that TaxAct is the best. Excellent service, flawless online software and very helpful planning/filing tips throughout the year. Keep up the great work!

  19. Mr. & Mrs. P says:

    My husband and I have been using TaxAct for several years now, and we love it!! Thanks to your straight forward forms, we are able to get our taxes done each year in a timely manner!! We have recommended TaxAct to many family members and friends!! We are both retired now! Thank you so much for thinking of taxpreparers like us when you created this wonderful software!!

    • No, THANK YOU for being such awesome customers! We truly appreciate you spreading the word and recommending TaxAct to your family and friends! Happy to know you’re loving your experience!

  20. Love it! Love it! Love it! I’ve been doing our taxes for years, thanks to TaxAct. We both retired this year, so I’m anxious to see if filing will be as easy as before!

    • That’s what we like to hear, Joyce! Thanks for being such an awesome customer! We hope fling your taxes this year is just as easy as before, but if you happen to have any questions along the way feel free to let us know!

  21. I have been using TaxAct for several years now (have lost count) and find it super easy to use. I know a lot of people hesitate to do their own taxes but I try to recommend the program to people whenever I can. I can always find what I need and I have confidence that the information I find is reliable. I will continue to use TaxAct in the future… no reason whatsoever to change!

  22. David G. Swain says:

    Hey, been using taxact for several years, but this year I won several jackpots. Can I use the win/loss records from casinos to help in counting toward my winnings? If so, wish form do I have to use?

    • Hi David! The casino should send you a From W2-G to report the winnings. You can deduct any losses up to the amount of your winnings on Schedule A as an itemized deduction. Thank you!

  23. Harris Keller says:

    I’ve been using TaxAct even well before it was TaxAct. Can’t think of the name but it was free and called Personal something. To me, TaxAct is a 5 STAR product. Thanks

  24. Wayne Riendeau says:

    Last year my wife and I filed married filing separately for the first time. Running both case scenarios through your program suggested that our tax burden would be lighter by filing separately. However by doing so I have been informed by social security that my monthly benefits for 2017 will be reduced because of my individual 2016 income return. Did I miss some cautionary note in the program that would have apprised me of this possibility? If not, should such a warning be included in this year’s program?

    • Hi Wayne, Unfortunately because Social Security benefit amounts are outside of the tax return and based on your earnings and SSN, we are not able to comment on this. Thank you!

  25. Simple to use. Warns if you miss something and has good descriptions so you can understand. Absolutely LOVE this program!

  26. I retired in 2015 my husband did our taxes and forgot to add the deferred income i had collected. I see they took Federal tax out but didn’t take out state tax. What should we do now?

    • Hi Judy, You will need to go back and file an amended return for both your federal and state tax returns using the 2015 products here. Thank you!

  27. Why can’t I call up my old (2013) returns on Taxact? Can’t find the printed copy of my state return and they say I never filed.

  28. jeannette hurd says:

    can tax act help me with filing a gambling form?

    • Hi Jeanette! If you’re talking about Form W-2G, any of our products will help you report that income on your tax return. Thank you!

      • Don’t forget Jeanette, that you can deduct the cost of gambling up to the point of winning – if you have receipts.

  29. Last year was my first experience in doing my taxes. This year I want to again but I’m not sure how to do it cause this year is my first year of drawing social security . Is there differences and I’ve heard you only have to file half the SS income.. help please

    • Hi Patricia! If your income is modest, it is likely that none of your Social Security benefits are taxable. However, as your gross income increases, a higher percentage of your Social Security benefits becomes taxable – up to a maximum of 85% of your total benefits. If you’re looking to go the DIY route when you file, our program automatically calculates the taxable amount (if any) of social security income based on your other income entries using the Social Security Benefits Worksheet. Social security benefits are reported on Line 20a of IRS Form 1040 U.S. Individual Income Tax Return. If you have entered your social security income and none of your social security benefits are taxable, no amount will be reported on Line 20b. Our product makes it easy to determine what’s taxable and what’s not. If you need help figuring out which product best fits your tax situation to get started, feel free to contact our Customer Support Center, and they’ll be happy to point you in the right direction. Thanks!

  30. I have been using TaxAct for several years and like it. However, I can’t import my cap gains/losses from Morgan Stanley. They have to be done by hand and that is a time consuming process for each with the chance of mistakes significant. Is there any chance that will become an automatic import?

    • Hi John! As you mentioned, at this time we do not support Morgan Stanley Stock Import. Unfortunately, there isn’t an immediate plan to have this feature added, but one way you can help make this happen is to contact Morgan Stanley and request for them to work with our product and support the import functionality. Thank you!

  31. Ah yes, it’s important to keep more than the 3 years of taxes. I was sent a letter from IRS asking for big bucks, but fortunately was able to easily find my copy from several years ago. When phoning I could explain to the IRS agent the exact numbers on the form, and then she could see what the problem was within minutes, finding that the problem was on the IRS side.

    • Yes BL……sometimes Taxpayers receive letters from the IRS especially when the Tax Return was mailed in (paper return). More errors are made due to the actual keying in of the data. Before paying a bill received from IRS, it is a good idea to look over your tax return, even use a second pair of eyes. I have seen cases where a tax form may have been missing and simple filing an Amended return would fix the problem.

  32. Gena Maxwell says:

    I filrd my daughter’s taxes for the last several years. For 2015 tax year, i mistakenly filed her maiden name instead of her legal name that has been on record for years. Her refund was not affected as it was paid and deposited directly into her bank. How do i fix this this year ?

    • Hi Gena! As long as you use your daughter’s legal name on her tax return for TY 2016, you shouldn’t run any risk of the return being rejected or slowly processed because of an incorrect name. Just always remember to double check your work! Thank you!

  33. Judy L. Eddy says:

    A professional tax preparer told me that I no longer need to file taxes because I always get back the small amount of Federal and state taxes that are withheld by PERA (Public Employees Retirement Assoc.).
    Is this true?
    Thank you.

    • Hi Judy! Unfortunately, based on the information you provided, we are not able to provide an answer. The best way to determine if you need to file is to view the filing requirements here. Thank you!

  34. Why would a married couple file seperately? Are there tax benefits for doing so?

    • Hi Don, Typically a married couple would benefit from filing a joint return rather than going it alone, however there are some cases where filing separately is beneficial. For instance if both spouses work and earn about the same amount they may pay the IRS less by filing separately. When they compare the tax due amount under both joint and separate filing statuses, they may discover that combining their earnings puts them into a higher tax bracket forcing them to pay a higher percentage of tax. However, if you you choose “married filing separately” for those reasons, keep in mind that it cuts the deductions for IRA contributions and eliminates child tax credits, among other tax breaks. Which filing status to choose really depends on what tax benefits are more advantageous to your situation. The best way to determine the right status to completely calculate the difference between filing jointly and separately without to compare the outcomes. Thank you!

  35. I’ve been with Tax Act since the beginning. Never regreted it and frequently suggest it to others. I’ve gone from working to retired and when things get complicated, I’m glad I have Tax Act.

  36. I agree with Ted.
    ‘It doesn’t cost you anything to store stuff. It only costs when you move it.’

    My father was able to prove he’d paid state taxes in Indiana when he was a WWII POW. He had records from 1945 that documented his status for 1985 Colorado taxes..

  37. I’ve used taxact for 4 years now still doing great!!! It was updated 2 years ago and still loving how it assists me in filing!!!! I recommend to anyone who asks…..????

    • RC Sullivan says:

      I agree. It’s a good program with a good price point. HOPEFULLY, TaxACT won’t do what its main competitor did and suddenly Jack the price way up and/or try to up-sell the user by blocking certain functions. Have you noticed the price increases for the past 3 yrs? Will they publish this comment?

      • Hi RC! We are committed to providing pricing transparency – something our competitors do not do. This year our products are free of shady fees or hidden upgrades so that you know what you’ll be paying when you start your return. Please contact our Customer Support Center if you ever have any questions regarding billing. Thank you! P.S. We’re happy to hear you’re happy with the filing experience!

  38. what is the criteria for filing qualifying widower?

  39. I most say I love doing my taxes on tax act. It is easy to use and if you have any question the answer is easy to find. This is my second year of doing my taxes. Thank you Tax Act for making a program easy to follow. I will tell everybody I know about this program it is nice to feel good that you can do your own return, save money and don’t have to worry if you did something wrong. Just follow the questions and if not sure all more questions. Thank you again!

  40. I love TaxAct…This year is my first time doing my own tax.(Business)..My family also use TaxAct to file their income taxes. It is easy and great price. I am not done but i started today…i am waiting for 1099K from one of the Credit Card Company….As soon as i get it….will submit… Thank you!

  41. I just star using the software and I have a question about schedule C with the standard miles. As soon I have to do line 9 I have to do the for from deduction can you explain me where is the best way to do standard miles. Thank

  42. I strip out and dispose of all supporting documents after 4 years but keep the actual 1040 forms forever. 45 years of just copies of my forms occupies 1/2 a filing drawer.
    What if Social Security was to tell you 20 years from now that they have no records of your income for computing your benefits? Or any other unexpected need.

    • Ted, just keep a copy of each W-2 unless you are self-employed.

      • Actually, it can be simpler. Social Security sends statements regularly showing past earnings and projected amounts you will earn. If their figures aree with your records, that statement is all you need to keep. But if there is a discrepancy, the time to set things straight is NOW, not when you’re ready to collect.

    • another Ted says:

      Yes on the W2’s and 1040’s , you might have to prove that an employer fraudulently did not turn your tax witholding in to the IRS years after the fact. I keep tax return supporting docs for 7 years and actual tax forms forever. Also keep all real estate settlement docs for possible future capital gains exclusions.

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