Getting a refund may be the highlight of tax season for most people, but if you misfile your taxes you could end up stuck in a financial mess that’s difficult to untangle. The good news is that it’s easy to avoid the common tax mistakes that can get the attention of the IRS or impact the timing of your tax refund.
Here’s some of the top tax filing mistakes and how you try and avoid them this year in (2023):
1. Select the right filing status
This may seem obvious, but sometimes it can be difficult to know which filing status is right. For instance, if you got married at the very end of 2022, can you choose married filing jointly? (Yes, you can!)
If you’re the primary breadwinner in your home, filing as head of household might make sense. However, there are some caveats here. If you don’t have a dependent, don’t pay for more than 50% of the household expenses, or are married, then you can’t use this filing status.
It’s a good idea to review the filing status rules before settling on one.
2. Check your numbers
Everything in your tax return is subject to complex calculations that determine your tax refund amount (or amount owed), but also your eligibility for certain credits and deductions. A mistyped earning or moved decimal point can mean the difference between qualifying or not qualifying for a given credit, or even between a quick refund and an IRS audit.
Check, double-check, maybe even triple-check the information that you’re entering into your return. Whether you’re entering income information in your W-2 or 1099, or inputting your expenses from the year, making sure your information is accurate is paramount.
3. Review your personal information
It’s also important to make sure your personal information like your legal name, current address, social security number, and bank account information (if filing online) are correct. Accidentally filing with an old address could cause your refund to be delivered to the wrong address — and if your bank account information is incorrect or outdated, it may be complicated to untangle the situation between the IRS and your old bank.
If certain personal information is wrong, the IRS may not accept your return at all, which can delay the acceptance of your return. In this case, you may need to amend your return and resubmit it before the IRS will issue your refund.
4. Don’t omit any income
If you earn non-traditional income or have a side hustle, it can be easy to overlook a gig or two. It’s important to keep detailed financial records so that you know which companies and clients paid you in 2022 and how much you earned.
Failure to disclose income could result in an IRS audit. If you owe the IRS money and fail to report income, even accidentally, you could end up owing additional late payment and filing fees.
5. Make sure you’re eligible before claiming certain deductions
Most Americans may take the standard deduction. However, itemizing your taxes may make sense if you qualify for specific deductions that will save you more money than claiming the standard deduction. However, there are some very specific guidelines for most credits.
For instance, if you work from home for an employer, you typically cannot claim the home office deduction. If you do end up claiming this tax deduction, the IRS is likely to flag your tax return — and you may need to amend your return and wait longer for your refund.
6. Keep yourself updated on the latest tax news
Tax laws can change quickly, so staying aware of what’s happening will ensure you file your tax return correctly. For instance, before the holidays in December, anyone with a freelance job who earned more than $600 through third-party payment apps like PayPal and Zelle expected to receive a 1099-K for their earnings.
However, the IRS determined there was too much confusion surrounding this tax form and decided to postpone this tax regulation. This means if you earn self-employment income, you likely won’t receive this tax form for your earnings. Instead you may receive a 1099-NEC or need to report this income on your own.
7. Review tax breaks carefully
Missing a tax break can prevent you from getting the largest refund possible. While this mistake won’t get you in trouble with the IRS, no one wants to leave money on the table.
Make sure you take a look at all of the most common tax deductions and credits to ensure you’re claiming all of the tax breaks you qualify for and receive the maximum refund.
This material is for informational purposes only and should not be construed as financial, legal, or tax advice.
You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes.
This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, MoneyLion does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information. For more information about MoneyLion, please visit https://www.moneylion.com/terms-and-conditions/.
