3 Tax Filing Mistakes That Could Cost You Big This Year
You’re down to the absolute wire for filing your taxes. As you rush to gather all your documents or make that last-minute, breathless call to your accountant, you’re more vulnerable to making certain filing mistakes. Between the fees, penalties and interest associated with some of these mistakes, they could cost you — big time.
While MoneyLion can’t turn back time so you can get started earlier (we aren’t Cher, after all), we can help you avoid some of the costliest tax filing mistakes. We connected with Scott Boyer, founder and owner of National Document, to break down what he sees most often.
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Not Being Totally Honest
You drove a few shifts for a rideshare company or made a little extra selling vintage gear online. Surely that side income isn’t going to matter to the IRS, so do you really need to report it?
Yes, you do.
Boyer says the No. 1 mistake he sees is people being less than truthful about their earnings.
Not reporting income from side jobs, freelance work and tips isn’t a little white lie or harmless omission. He warns that, in many cases, that income is already being reported to the IRS through Form 1099s or similar documents. If you don’t report it, the IRS will notice the discrepancy.
“Once a mismatch is spotted, it can trigger penalties and interest that could easily balloon into hundreds or thousands of dollars,” he said.
Coming Unprepared
Another common and costly mistake Boyer sees too often? Showing up unprepared.
“People often forget about bringing key documents for deductions like childcare expense records, education statements and 1099s, and this puts them at risk of missed credits,” he said. “Missed credits can easily cost hundreds of dollars per year.”
Even seemingly small oversights can have a major impact. For example, forgetting to update your employer after a move can mean tax forms are sent to your old address, potentially delaying your filing and increasing the risk of penalties or interest.
Not Taking All the Credits and Deductions You’re Eligible For
Credits and deductions are the dynamic duo of saving money at tax time. Yet Boyer says too many people simply aren’t aware of all the credits available to them — or they assume they don’t qualify and never check.
“I’ve had an elderly mom come to me, only for me to find out she never filed her disabled son as a dependent,” he said. “Although she received quite a hefty amount that year, she told me there were plenty of past instances when the money would’ve helped more.”
Boyer adds that families can “easily lose $500 to $1,000 per year in refundable credits.” Over time, he’s noticed that families are prone to missing a few key credits:
The Child and Dependent Care Credit
The American Opportunity Tax Credit
The Earned Income Tax Credit
He’d also like to steer people away from making a few key errors related to the Child Tax Credit. One of the biggest issues he sees is divorced or separated parents both trying to claim the same child. As Boyer notes, only the custodial parent can claim the credit unless there’s a specific written agreement or IRS form allowing otherwise.
Parents should also ensure their children meet all dependent eligibility requirements. That includes having proper documentation on hand. Without records such as a Social Security number or proof of residency, the credit can be delayed or denied altogether.
The Bottom Line
Tax Day is almost here. Yet in your haste to get your taxes done, be wary of making common and costly mistakes.
Slow down. Above all, be honest with the IRS and report all your income. Gather your documents and learn about potential credits and deductions you may be eligible for. A little effort can go a long way. And maybe start a little earlier next year, if you can.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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