Drake Software blog for tax pros, covering tax, IRS news, and more

Common Tax Filing Errors to Avoid

Common Tax Filing Errors to Avoid

Tax season can be a stressful time for many preparers. The added pressure of an approaching deadline can sometimes cause even the most meticulous minds to overlook a filing mistake. With careful attention to detail however, you can avoid common errors that could potentially delay refunds or even trigger an audit.

Whether you're filing business returns or submitting documents for an individual client, it's crucial to review each return thoroughly before submission. After all, no one is perfect, even preparers with years of experience benefit from reviewing common mistakes. Here are 18 key areas the IRS recommends focusing on to ensure accuracy and efficiency in your tax filing process:


E-Filing for Enhanced Accuracy: Embracing technology can significantly reduce the likelihood of errors in your tax return. Consider e-filing taxes, which not only streamlines the process but also includes built-in error checks. The e-file system can catch common mistakes and prompt you to make corrections before submission, potentially saving you time and hassle.


Personal Information Verification: Double-check all personal information entered on a tax return, including name, taxpayer identification number (such as Social Security number), and current address with ZIP code. Incorrect information in these fields could lead to processing delays or complications in communication with tax authorities.


Filing Status Accuracy: Selecting the correct filing status is crucial as it determines tax rate and eligibility for certain deductions and credits. Review IRS guidelines to ensure you choose the appropriate status for the specific situation of the client, whether it's single, married filing jointly, married filing separately, head of household, or qualifying widow(er) with dependent child.


Dependent Information Verification: If claiming dependents on tax returns, ensure that all relevant information is accurate and up-to-date. This includes verifying their names, Social Security numbers, and eligibility for tax credits. Checking the appropriate boxes to indicate dependency status is also essential for claiming credits and deductions accurately.


Precise Taxpayer Identification Numbers: When entering names and taxpayer identification numbers (such as Social Security numbers), ensure they match the information exactly as it appears on each person's Social Security card. Any discrepancies could lead to processing delays or potential issues with the IRS. Notify the Social Security Administration promptly of any name changes to avoid complications.


Income Reporting Correctness: Double-check that all sources of income are reported correctly on the appropriate lines of the tax return. This includes wages, salaries, tips, interest, dividends, and any other income earned throughout the tax year. If there are additional income or adjustments to income, attach Schedule 1 (Form 1040) as necessary to provide a comprehensive overview.


Deductions and Credits: One of the most common mistakes taxpayers make is miscalculating deductions and credits or placing them on the wrong lines. It's essential to accurately calculate your deductions and credits and ensure they are correctly reported on the tax return. Be sure to attach any required forms or schedules to support claims.


Negative Amounts: When reporting negative amounts on tax returns, such as deductions or losses, it's important to use brackets to indicate these negative figures. Failure to do so could result in errors in your tax calculations.


Standard Deduction: If opting for the standard deduction rather than itemizing your deductions, make sure you've calculated the correct standard deduction amount for the filing status. Additionally, if you're indicating age or blindness to qualify for a higher standard deduction, ensure that you've done so accurately.


Tax Calculation: Double-check your tax calculations to ensure accuracy. If you're using tax tables to determine tax liability, make sure you're referencing the correct column for filing status and taxable income level. Even small errors in calculations can result in discrepancies in tax returns.


Signatures and Dates: It may seem obvious, but forgetting to sign and date tax return can lead to delays in processing and potential penalties. If clients are filing a joint return with a spouse, ensure that both of them have signed and dated the return appropriately.


Identity Protection PIN (IP PIN): If clients have been issued an Identity Protection PIN (IP PIN) by the IRS, follow the instructions provided regarding its use. This PIN helps protect from identity theft by adding an extra layer of security to tax returns. Failure to include the IP PIN when required could result in processing delays or rejection of the return.


Wage and Withholding Reporting: When preparing a tax return, remember to attach Copy B of each Form W-2 from all employers. Additionally, if a client has held multiple jobs throughout the year, combine the wage and withholding amounts from each job on your tax return. This ensures that their income is accurately reported and helps prevent discrepancies that could trigger an IRS inquiry.


Other Forms and Schedules: Be diligent about attaching all necessary schedules and forms in the correct sequence as indicated in the tax instructions. Failure to include required forms or completing them out of order can lead to processing delays and potential penalties. Double-check your tax preparation software or checklist to ensure nothing is overlooked.


Mailing Address and Postage: Before sending off the tax return, verify the correct mailing address from your tax form instructions. Using the wrong address could result in the return being lost or delayed in processing. Additionally, ensure that you affix proper postage on the envelope to avoid any delivery disruptions.


Tax Payment: If a client owes taxes to the IRS, it's essential to enclose a check or money order payable to the "United States Treasury" along with the tax return. Include essential identifying information, such as their name, address, and Social Security number, to ensure proper crediting of their payment. Failure to submit the correct amount or include necessary information could result in penalties and interest charges.


Refund Direct Deposit: If a client is expecting a refund and you opt for direct deposit, double-check the routing and account numbers provided on the tax return. Errors in these numbers can lead to delays in receiving the refund or, in worst-case scenarios, depositing funds into the wrong account. Take the time to verify these details to ensure a smooth refund process.


Recordkeeping: After filing the tax return, make it a habit to keep copies of the signed return and all accompanying schedules for your records. These documents serve as important proof of tax filing and can be invaluable in case of an audit or if you need to reference information in the future. Store them in a safe and easily accessible location for future retrieval.


By paying attention to these common areas of potential error, you can help ensure a smooth and accurate tax filing process. Whether you choose to e-file the returns you are responsible for, or opt for traditional paper filing, taking a moment to review each return thoroughly can save you from headaches down the line. A tax preparer should be aware of these often-encountered flaws in tax returns, and be willing to spend the extra time examining the return to minimize the possibility of refiling.

If you're unsure about any aspect of a client’s tax situation, don't hesitate to seek guidance from a qualified tax source such as the IRS, TheTaxBook, or Drake Software’s educational resources which can provide personalized assistance tailored to your needs. Remember, accuracy is key when it comes to tax filing, so invest the time and effort now to avoid complications later.


Source: IRS Topic no. 303


Drake Software Blog Team

The Drake Software Blog Team is proud to cover the latest in tax-industry-related news, from tax law and IRS updates to technology and business strategies. If you have questions about an article or just want to reach out to our staff, email comments@taxingsubjects.com.