The United States has a multi-layered income tax system under which taxes are enforced by state, federal and most local governments. State and federal income taxes are calculated by applying a tax rate to a taxable income. The state and federal income taxes vary with respect to the tax rates and how they are applied, types of income that is taxable, deductions and tax credits allowed.

The federal tax system allows taxpayers to use standard or itemized deductions. While the majority of states also allow the same itemized deductions from the federal tax return, certain states mandate adjustments. The most common adjustment is the exclusion of the federal deduction for state and local income taxes.

While most of us pay federal income taxes, the taxes we pay at the state and local levels differ depending on where we live. In fact, seven states have no personal income tax like Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming and two states tax dividends and investment income but not wages like New Hampshire and Tennessee. All other states have either flat or progressive income taxes. Actually, Nevada has the 8th highest sales tax rate in the nation, so while you may not have to pay taxes on your income, you will be paying every other time you buy something in the Silver State.

While avoiding state income taxes may seem appealing, there’s often a catch. Some states tax consumers are affected more heavily when they pay for things like groceries and gas. Nevada has no trouble operating without a corporate or personal income tax because millions of tourists who visit the state each year manages to collect nearly a billion dollars from gambling taxes and fees. Nevada also gets its revenue from its high sales taxes, taxes on the casino and hotel industries, and sin taxes.

With all the rules and regulations, you may already know that there is a lot of information out there. You need be careful whether you’re starting to think about your taxes or maybe you’re already working on them.

It’s not difficult to make a mistake of some kind during the filing process, especially as the tax code remains to grow in both complexity and length. Chances are good that if you make a minor error, the IRS won’t come visiting. But it will take longer to process your return, and the IRS might even need to contact you in order to make the needed corrections. This will almost definitely delay your refund. In some cases, such as with unreported earnings, you might owe penalties and interest!

Tax preparation software is preventing more taxpayers from making mistakes on their annual tax returns. Yet, just one slip in entering information on your computer could end up costing you money and also delay your refund.

Here are common tax-filing mistakes that show up each tax season. As you review your tax return for filing by the April 15 deadline, make sure you haven’t made any of them.

 

Missing or wrong Social Security numbers

The IRS no longer puts taxpayer Social Security numbers on tax package labels in response to privacy concerns, though some taxpayers forget to write in their identification numbers. Your tax ID number is critical because there are so many transactions keyed to this number. Providing the wrong Social Security number on your return will just delay the processing of your return (and, possibly, even your refund).

To avoid a headache for both parties you and the IRS, check the number for accuracy numerous times against the actual Social Security cards. If you are filing jointly, don’t forget to double-check your spouse’s social security number, as well.

 

Different or misspelled names

It’s not very likely that you’ll get your own name wrong but you’d be surprised at how many taxpayers misspell the names of their spouse and/or dependent. The IRS is all about numbers, but names are just as important too. When the names of a taxpayer, his or her spouse or their children don’t match the tax identification number that the Social Security Administration, or SSA, has on record, that variance will cause the IRS to slow down or kick out processing of the tax return.

This is often a problem for new wives. Many women change their surnames when they marry. That’s also an option for spouses in same-sex marriages, which the IRS now recognizes. If you didn’t notify the SSA of your name change shortly after your wedding, do so now to ensure that your new name won’t cause a problem when you file your first joint tax return unless you want the IRS to think you are someone else.

Take a few minutes to proofread your return for accuracy. It might seem stupid, but it’s a common mistake.

 

Incorrect filing status

This is another common error that can delay your refund. Make sure you choose the correct filing status for your situation. You have five options to choose from: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) With Dependent Child, and each could make a difference in your final tax bill.

Some taxpayers mistakenly select “Head of Household” instead of “Single,” and others make the mistake of checking more than one status. It’s easy to empathize with those who make the error because the titles can seemingly apply to the same individual.

States were required to recognize same-sex marriages that were legally performed in another state, even if the state didn’t recognize same-sex marriages. Thus, same-sex couples who are legally married will be treated as married for purposes of filing their tax returns on the federal and state level.

If this is the first tax-filing season since your divorce and you now are a single parent, writing “head of household” probably will be more beneficial. And what if you’re still married, but you and your spouse are thinking about filing separate tax returns? That works in some cases, but not all.

Using the wrong status could cause the IRS to reject your return, delaying your refund or causing interest and penalties on the quantity you owe.

 

Doing the math wrong

Most tax forms require numerous calculations, and it’s not difficult to get caught up by all the different terminology and figures. Don’t panic, slow down, use a calculator, and fill out the forms and worksheets more than once to check your work. Math mistakes also can reduce your tax refund or result in you owing more than you thought or even cause an audit.

Using a tax software program to file your return can help decrease math errors. The built-in calculators do the work for you, adding, subtracting and inserting numbers on the extra forms as needed. But you still have to make sure your initial numbers are correct. Entering $3,500 when the real number is $5,300 makes a lot of tax difference.

The IRS usually corrects these errors, but, in the meantime, your return (and refund) could be late. If a math error results in an underpayment, the IRS will require you to pay the additional amount, plus interest accumulated since the due date of your return.

If you file on paper, double-check your math before you file. For e-filers, your tax software will do the math for you.

There are plenty of free options, especially if you have a straightforward financial life. The IRS estimates that 70 percent of taxpayers are eligible for IRS Free File, its free tax-preparation-and-filing software. Tax software can help make itemization easier and reduce math mistakes as long as you’re not the one making the mistakes in the first place.

 

Failing to report all of your income

Did you have a side job this year? If so, you probably received a Form 1099-MISC listing the extra earnings. But don’t overlook other streams of taxable income, such as canceled debt, gambling winnings, and unemployment benefits. If you received a Form 1099-MISC from a fantasy football Web site or casino, the IRS received one, too. Keep that in mind.

What if you didn’t receive a Form 1099-MISC when you get paid?

For example, if you have got a salaried job and you do wedding photography on part time, you might get paid by cash or check. Will the IRS know about it? Maybe not, particularly since it most likely won’t be reported on the happy couple’s tax return, right?

Kyle Walters, a CPA, and CPWA with Atlas Tax Advisors in Dallas, Tx., says “even though the income – whether it’s $500 or $5,000 – can’t necessarily be traced, it does appear in your bank account. And that evidence is enough to raise suspicion. The IRS has access to your banking information, so even though you don’t report the income from your side gig, your bank account clearly shows that money showed up from somewhere.”

The IRS will adjust your return to mirror unreported income, and you could be hit with a penalty that’s equal to 20% of your underpayment. For example, if your oversight caused you to understate your tax liability by $500, your penalty would be $100.

 

The write-off that is right in your hands or errors figuring out credits

These are relatives to the standard math mistakes. In these computation cases, taxpayers or their tax professionals make mistakes in figuring such tax-return entries as Earned Income Tax Credit, Child and Dependent Care Credit, and/or standard deduction as withholding and estimated tax payments.

Credits and special deductions also cause problems. For example, those who are older than 65 or blind should claim the higher standard deduction. Another example, if you’re not allowed to claim a specific tax break because of your filing status (filing as Married Filing Separately disqualifies you from a number of tax breaks).

Just by overlooking deductions, taxpayers give up an average of about $600 at tax time, according to research by an economics Ph.D. candidate at the University of California at Berkeley named Youssef Benzarti. He found that many people don’t itemize when they should; therefore, passing over breaks such as the write-off for investment-related expenses. “Or, they take only the easy deductions like mortgage interest and state taxes” and not harder-to-prove ones, such as the use of a home office and charitable donations.

People sometimes automatically take the $4,000 tuition and fees deduction because it sounds like the most cash. But the $2,500 American Opportunity Tax Credit is characteristically a better deal, says Melissa Labant, director of tax advocacy for the American Institute of CPAs. You are entitled to the full AOTC if you spend $4,000 on tuition and fees, as you can cut your taxes by 100% of the first $2,000 and 25% of the next $2,000. Also, your adjusted gross income must be $80,000 or less if single, $160,000 or less if married and filing jointly. (Partial credit is available for incomes up to $90,000 for singles and $180,000 for couples filing jointly.)

One condition to note: You can’t take the AOTC for more than four years for anyone dependent. So, if your kid takes longer to graduate, you’ll be glad to have the tuition and fees deduction for year five.

All types of donations, from cash to cars, could be valued tax deductions, so make sure you count them all when you file. Be sure to follow the donation tax rules, the most vital being that you give to a qualified organization, one that has tax-exempt status with the IRS. Also, be careful when calculating any gifts of household items and clothing. Tax law now requires that these donations are in good or better condition or the deduction is rejected. And remember that the amount you can claim for donated goods is the fair market value of the items; that’s what an eager buyer would pay for it in its current condition, not what you paid for it.

Remember that the IRS cares about your income, no matter how small or big it is? The same goes for deductions. The best way to prepare for deduction success is to keep track of charitable spending, moving expenses and any expenses you rack up for a job search or job relocation. If you aren’t sure about a deduction or credit, read the instructions on the form carefully or check with your tax professional to find out what other savings taxpayers like you classically miss. Review your return to make sure you don’t commit any of these pricey errors. If you want to go it alone, follow all instructions carefully, and reach out to the IRS for help if you need it.

 

Incorrect Bank Account Numbers

Taxpayers can have a refund directly deposited into multiple bank accounts. Direct deposit will allow you to get your refund more quickly, and you won’t have to worry about your check getting lost in the post. This option is a great way to get your refund back in a few weeks. It’s fast and easy. But it’s only fast and easy if you provide the right information.

Make sure you enter your bank routing and account numbers correctly. The last thing you want is your return ending up in someone else’s bank account, right? If you screw up and your money ends up in another person’s account, the IRS says you’ll have to handle it yourself with the bank.

Check your bank account number more than once to ensure you receive your deposit quickly and safely.

 

Forgetting to sign your returns

Sometimes in the rush to get the return in the mail, you forget to sign the return. This mind-numbing mistake will attract unwanted attention from the IRS staff. This is one case where a mistake isn’t just a mistake since the IRS considers an unsigned tax return completely invalid, much like an unsigned check, and that means on e-filed returns, too.

A return is only considered timely filed if properly signed and submitted. Keep in mind that if there is a joint return, both spouses are required to sign and date a joint return in order for it to be valid.

If you are doing your taxes by hand, use sticky notes to mark the place where you need to sign. Also, double-check to make sure your Social Security number used on the return is correct, and don’t be in such a hurry that you put your 1040 in the envelope without signing it.

If you are filing electronically, you must verify your identity by entering either the adjusted gross income amount from your year tax return or the self-select PIN you used last year. The IRS says using an electronic filing PIN is no longer an option.

Tax software can help reduce these unforced errors. Generally, tax preparation software auto-fills this information for returning customers, but if you are using a new product for the first time, you may have to enter the information yourself. So be extra careful to make sure any saved information is correct.

 

Missing the April 15 deadline

Millions of taxpayers put off filing until the very last minute. That’s OK as long as your mailed paper return is postmarked by the April filing deadline or you hit “submit” to e-file your 1040 by midnight of the deadline day.

If you can’t get your act together by the April 15 deadline (April 16 if you live in Maine or Massachusetts), file for an extension via Form 4868. You can request the extension by phone, online or by mail. An extension will delay your filing deadline until October 15. It’s vital to remember, though, that while an extension gives you more time to file, it doesn’t give you more time to pay what you owe. That isn’t a problem if you, like the majority of taxpayers, are due a refund.

But if you owe, filing for an extension buys important protection. If you fail to pay the amount due with your request, you’ll start piling up underpayment penalties of 0.5% a month on the unpaid amount, and up to 25% of the unpaid balance, plus interest (currently 3%). Yet, that’s a lot better than the consequences of failing to file altogether, which entails a more heavy penalty of 5% a month on the unpaid amount, up to 25% of the unpaid balance, until the return is filed.

If you don’t file for an extension, you’ll possibly be hit with fees and late filing or non-filing penalties. The IRS will let you know you missed the deadline, but if you don’t want to unnecessarily be hit with interest, be sure to file on time.

 

Failing to file a return at all

That, I believe everyone would agree, is the biggest mistake of all. You can’t win if you don’t play. Penalties for failing to file a tax return are usually more than any late payment fines you would owe the IRS. So even if you owe money, it is better to file and work out a deal with the taxman.

When you’re not required to file or when you are not filing, you might miss out on the earned income credit. At the lower end of the income scale, a very common mistake that could cost taxpayers money is not filing a tax return and therefore missing out on the earned income credit. This is a refundable credit, meaning it can permit a taxpayer to a refund in a surplus of the taxes he or she has paid.

Donald Goldman, a professor who specializes in taxation and teaches at Arizona State University says “The average credit in 2012 was more than $2,000 and can reach almost $6,000”.

For as much as Americans complain about paying taxes, we sure leave a lot of money on the table. On March 1, 2017, the IRS informed that it was holding on to $1 billion in unclaimed refunds for people who didn’t file a 2013 Federal Income Tax Return. Congratulations! You’ve given the government an interest-free loan where instead, you could be putting that money to work for you throughout the year!!

 

You should now know what some of the most common mistakes are. If you qualify as a taxpayer, don’t do your taxes at the last minute and then you flash through your return and miss things and make mistakes. When you miss items or do things incorrectly, this can cause an audit. Begin your taxes early, put it down, double-checking your work, and get a professional, if you need help.

If you’ve got a tax professional helping you, speak up, ask them if you don’t understand the amounts showing in your return and let them know you want to validate everything before they file your return. Remember, you are the one signing the return. So, have the professional explain everything to you. You’ll get your money’s worth then some money back.