American taxpayers are being reminded to check for common tax return errors as the filing deadline of May 17 draws near. The IRS has warned that making a mistake on your tax return is likely to affect how quickly your return is processed and can lead to a delay in the issue of tax refunds.
Given the impact of COVID-19, more taxpayers than usual are relying on a refund to boost their household finances - and that makes avoiding these frequent mistakes more important than ever. Here’s 10 ways to reduce the chances of a tax return slip that could see your money held up at the IRS longer than usual.
Doing away with paper returns and filing online, whether using Free File on the IRS site or alternative e-file providers, can both reduce the likelihood of making a mistake and help ensure you get the biggest deductions to minimise the amount of tax you must pay. The best tax software automatically applies the latest tax legislation, flags all of the credits or deductions that could apply to you, works it all out, and makes clear all of the information you need to supply.
In order to avoid fines and interest penalties, make sure you report all of your taxable income when filing. Having the relevant income documents to hand - such as Forms W-2, 1099-MISC or 1099-NEC - before beginning to file should help avoid any omissions and you underreporting. If you use personal finance software, perhaps this can help avoid omissions too.
Check names and Social Security numbers
It may sound obvious, but always double check that you’ve entered each Social Security number (SSN) and individual's name on your tax return exactly as they are shown on the Social Security card. As normal practice, you must list the SSN of any person you claim as a dependent - if they or a spouse doesn’t have or isn’t eligible to get a SSN, you should note down the Individual Tax Identification Number (ITIN) instead.
Check your filing status
If you’re uncertain about your filing status, use the IRS Interactive Tax Assistant to get it right - this is particularly important if you could fall into more than one status.
Pay attention over virtual currency
If you’ve moved on from the best forex brokers, and gone virtual, then this is for you. With this year’s Form 1040 querying whether you’ve “sold, sent, exchanged or otherwise acquired any financial interest” in any virtual currency during 2020, note that if your only involvement was to buy virtual currency last year, then you do not have to answer "yes" to this question.
Use the right address
If filing online isn’t an option, and you need to complete a paper return, always make sure you’re mailing your return to the correct address if you want to avoid any extra delays on top of the slower processing you’re likely to experience anyway. You can find the right address on the IRS website or on the form itself.
Check your bank details
You’ll get your refund faster if you ask the IRS to forward your money by direct deposit...but only if the routing and account numbers you share when you file are correct. Get a digit wrong, and your money could end up in someone else’s online bank account.
Sign and date
A particularly important reminder for joint filers is that both spouses need to sign and date where requested. If you e-file, it’s possible to sign using a self-selected personal identification number (PIN) too.
Make a copy
Just in case something goes missing, or there’s a query that you need to check, make sure you take a copy of your signed return and documents and keep them somewhere safe.
Need more time?
If you’re struggling to meet the May 17 cut off, and need more time to file, you can always request an extension to October 15. But while this means you should avoid falling foul of late filing penalties, remember you’ll still need to make your tax payments by May 17.