Personal Finance: 8 Common Errors Made When Filing an Income Tax Return

The Rules of Thumb blog from MoneyThumb likes to make sure our readers concerned with personal finance are ready at tax time Now here we are, with only a few weeks left before April 15, 2018, the deadline for filing your income tax return. To help you make sure that you are filing your income tax return properly and keep from making mistakes that could delay a refund or cause trouble with the IRS, today we are offering the following 8 common errors that people make when filing their income tax return:

Personal Finance: 8 Common Errors Made When Filing an Income Tax Return

1. Being careless 

Whether you are feeling the pressure from the April 15th deadline, or the mistakes you make are caused by just plain carelessness, technical errors like the wrong Social security number, name misspellings or a simple math error can cause problems and delays with your return. Tax software programs flag errors like this, but every filer should still pay close attention and thoroughly review their income tax returns before sending them in, especially those who are using the manual method of a good old-fashioned pen.

2. Choosing the wrong filing status

The five filing options on your income tax return are as follows: single, married filing jointly, married filing separately, head of household, or qualifying widow/widower with dependent child. Choosing the right status is important as it affects how much you pay in taxes, or how much you might receive in your refund. For instance, filing as head of household provides more benefits than married filing separately, explained Mark Steber, chief tax officer of Jackson Hewitt Tax Services.

3. Forgetting to report income

All your sources of income you received in 2017 should be included on your income tax return. This includes your salary, cash received, retirement withdrawals, bonuses, stock payments, and even gambling winnings. If you get caught with unclaimed income, you could get hit with major penalties from the IRS.

4. Hiring a pro when you can DIY

Some people have very complicated tax situations where an expert needs to be brought in. Many of our readers use an accountant to file their income tax returns. But many Americans have simple filings that might not require professional assistance, the experts say. If you have an adjusted gross income of $66,000 or less, check if you can file your federal taxes for free using the IRS's Free File software options.

5. Not taking all eligible deductions

Don't leave money on the table or pay more in taxes than you have to. Take the time to figure out which credits and deductions you're eligible for to reduce your tax liability and get as much back as possible. The IRS isn't going to tell you if you missed a valuable credit you could have claimed, said Steber.

The Earned Income Tax Credit, for example, is commonly overlooked, with about one in five eligible taxpayers missing out on it, according to H&R Block. It's a sizeable credit with an average amount of more than $2,400.

6. Being disorganized

Tax forms, like your W2, start coming in the mail or are passed out by employers at the start of the year. You need these to file your income tax return. Just be sure to collect them all before you file. Lisa Greene-Lewis, a CPA and tax expert from Turbo Tax, suggested keeping a folder by your mail so you can instantly drop the paperwork in and keep everything in one place. It's also helpful to keep an updated log throughout the year for things like mileage and charitable donations that you plan to claim on your return.

7. Procrastinating

Tax season comes every year, there's no escaping it. Yet many Americans are habitual procrastinators and so they scramble to get their returns in. By waiting until the last minute, you increase your risk of mistakes.

8. Not filing a return

Not everyone has to file a tax return. But even if you don't have any tax liability, it could be in your best interest to file anyway. The IRS will only issue refunds to filers. So if you had too much federal taxes withheld from your paycheck or are eligible for other credits, you have to file a return to get the money. Earlier this month, the IRS said it had $1.1 billion in unclaimed federal income tax refunds for around 1 million people who didn't file a tax return in 2014.

By paying attention to these 8 common errors people make concerning their income tax returns, you can speed up a refund, avoid problems with the IRS, and have better peace of mind knowing you did your best.