4 Rookie Tax Mistakes and How To Avoid Them, According to a CPA
There’s a first time for everything, including filing your taxes. Even if this isn’t technically your first tax-time rodeo but you’re still relatively new to filing, you could have the jitters. After all, you’re still a rookie — and prone to making rookie mistakes. Unfortunately, those mistakes can come with significant consequences.
Read More: The Side Hustler’s Guide to Paying Taxes Without Crying (Much)
For You: Start Growing Your Net Worth With Smarter Tracking
To avoid making rookie mistakes, you’ll need insights from a true expert. Lucky for you, MoneyLion found just the expert. CPA Ruth White, co-founder of White Sands Tax Services, took a moment during this busy tax season to identify four common missteps and explain how to steer clear of them.
Mistake No. 1: Speeding Through Your Return
White says that too many people treat filing their tax return like running a race instead of compiling a report. In their haste to get things done, they hit “submit” before they have all their documentation, such as W-2s or 1099s. That can lead to errors, delays and even a return being rejected.
Doing a rush job puts you at risk of making mistakes like entering a name that doesn’t match your Social Security records, entering the wrong digit in a Social Security number or making a typo in your direct deposit routing or account number.
“Finally, the big human mistake is skipping the last review,” she said. “That is where I see the wrong filing status, credits miscalculated, math errors or a paper return that is simply unsigned. Yes, it still happens.”
How to avoid it: Wait until you have the forms you need, then check your return carefully and consistently. Taking your time now will save you a lot of hassle and headaches down the line.
Mistake No. 2: Not Using the Right Filing Status
Determining your filing status isn’t always easy, particularly if you’re a new tax filer. White sees people commonly claim Head of Household simply because they have a child. While that choice makes sense, she warns that the IRS looks for specific facts.
“Generally, you must be unmarried or considered unmarried; you must have paid more than half the cost of keeping up the home; and you must have a qualifying person under the rules,” she said.
She says that qualifying surviving spouse is another filing status that is frequently missed or misused. If a spouse passes away while leaving behind dependent children, the survivor could potentially use this status for up to two years after the year of death. White adds that this preserves joint-return rates and the larger standard deduction if not itemizing.
How to avoid it: The good news is that there’s a practical way to figure out the right status. White’s advice? “Stop guessing and use the IRS Interactive Tax Assistant for filing status, with real details on marital dates, dependents and household costs.”
Mistake No. 3: Missing Deductions or Credits
You’re diligent about reporting your earnings — even from freelance gigs. But you’re still not sure which credits and deductions you’re eligible for. You’re so worried about claiming the wrong ones that you don’t claim any at all. White says that’s a big mistake.
“The credits I see overlooked most are the Earned Income Tax Credit, the Child Tax Credit, the Child and Dependent Care Credit and the Saver’s Credit,” she said. “On the deduction side, a common misconception is that taking the standard deduction means no other deductions matter.”
She adds that certain adjustments, like IRA or HSA contributions and student loan interest, can still apply even when you do not itemize, if you meet the rules and keep appropriate records.
How to avoid it: If you’re unsure what you qualify for, consider using reputable tax software or working with a credentialed tax pro. Taking advantage of those services can help you claim all the credits and deductions available to you.
Mistake No. 4: Not Reporting All Your Freelance Income
To White, one of the biggest myths new tax filers and freelancers encounter is that if they don’t get a form, they don’t have to count the income. If that money came through an app or as cash, they assume they don’t need to pay taxes on it.
“The IRS is clear that gig economy income is taxable and must be reported even if it is part-time, paid in cash, paid through apps or not reported on a 1099,” she said.
How to avoid it: First, keep records of your payments — even if they came in through a platform like Venmo or PayPal. If you freelanced for a company that should have sent you a 1099, be diligent about getting that form from them.
The Bottom Line
The best way to get better at anything — including filing your taxes — is the same way you get to Carnegie Hall: practice, practice, practice. As you gain experience, be aware of some common tax filing errors that rookies like you might be prone to making.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
More From MoneyLion: