9 Common Tax Mistakes That Cause Delays and Penalties

Most filing errors are often simple and easy to miss. They are misspelled names, transposed account numbers, and missing signatures, and they cost people weeks of refund delay or money in penalties. The IRS reports an error rate of 21% for paper returns, compared with less than 1% for electronically filed returns.

While e-filing has greatly improved the accuracy of taxpayer returns, there are still some common user errors which can cost you time and money. Here is a list of some of those common errors. Please read through them and do your best to avoid these this tax year.

Different names can cause a problem.

While misspelled names can cause an issue when the name on the tax form doesn’t match the name with the Social Security Administration, we’re talking about using different names. This problem may arise when someone gets married and changes their surname and doesn’t follow up with the Social Security Administration (SSA). The same goes for when they get divorced. The name on your return needs to appear exactly as it does on your Social Security card.

You have to count that side income.

If you worked a side job and a client gave you a 1099, you have to count it. If you received this tax form, it means the payer also filed it with the IRS, saying they paid you. If you don’t include it on your income statement, you may get audited and have to pay penalties and interest on the unpaid income. There is also no minimum below which income stops being reportable. Even if no form arrives, the income still belongs on your return.

Wrong direct deposit information is a common error.

While many people e-file and wait for their refund to be deposited directly in their bank account, wrong account or routing numbers could delay that process. A simple error like switching 2 numbers could result in you not getting your money right away and having to wait for a check to be mailed to you. The IRS runs a validation check on routing and account numbers before depositing. If the numbers fail that check, the agency mails a paper check instead. If the numbers belong to a real account that is not yours, the refund can land in someone else’s account and you will have to work with the bank to recover it.

Inputting the wrong social security number is often an error.

Once upon a time, the IRS used to put Social Security Numbers (SSN) on tax packages. They’ve since stopped doing it for security reasons, but it means that taxpayers must enter it themselves. It may either be forgotten or input wrong, causing an error and taxpayers using e-filing software are not immune to this error. Everyone should double check that their SSN is typed in correctly, and that it matches the card exactly.

People forget to sign and date their tax return.

A tax return won’t be processed without a signature, this goes for both written copies and e-filed copies. If you’re mailing it, make sure you’ve signed all the areas that require a signature. If you file electronically, you will either be asked to sign electronically or verify your identity using a personal identification number. On a joint return, both spouses generally have to sign. Exceptions apply for members of the armed forces and for taxpayers with a valid power of attorney.

Missing the deadline is a common mistake.

While most of us know April 15th is the deadline, it can easily sneak up on us. Many people put off doing their taxes until the last minute and end up missing the deadline. Filing late triggers a failure-to-file penalty based on how late the return is and how much tax is unpaid. An extension gives you more time to file, but it does not give you more time to pay. Anything you owe is still due in April. More on that in our guide to filing deadlines and extensions.

Filing before all of your documents arrive.

Filing early gets your refund early, which is why so many people rush it. The problem is that employers, brokerages, and other institutions sometimes send forms late or send corrected versions weeks after the first one. If you file and a corrected form shows up afterward, you may have to amend your return.

Before you file, think through everything that could generate a tax document. A new investment account, a charitable donation, tuition payments, student loan interest, and crypto transactions all produce paperwork.

Choosing the wrong filing status.

There are five filing statuses: single, head of household, married filing jointly, married filing separately, and qualifying surviving spouse. Your status affects your tax bracket, your standard deduction, and which credits you can claim.

More than one status can apply to the same person. Someone who is single and supports a dependent may qualify for both single and head of household, and head of household usually produces a better outcome. Picking the wrong one is not an error the IRS will correct in your favor.

Leaving credits and deductions on the table.

The IRS will generally catch income you left off a return. It will not tell you about a credit you forgot to claim. The Child Tax Credit, the Child and Dependent Care Credit, the Earned Income Tax Credit, education credits, and the Saver’s Credit all go unclaimed by people who qualify for them.

The same goes for the choice between the standard deduction and itemizing. You can take whichever is larger, but only one, and running the numbers both ways is the only way to know which applies to you.

What to do if you already filed with an error

Small math errors usually get corrected by the IRS, which sends a notice explaining the adjustment. For anything larger, such as omitted income, a wrong filing status, or a missed credit, you file an amended return. You generally have three years from the date of the original return to do it. See our guide on how to file an amended tax return.

Most of these errors never happen on an e-filed return, because the software runs the math, checks the formatting, and flags what is missing before anything reaches the IRS. E-file.com walks you through each step and catches the common problems before you submit.

Note: Tax laws may change with little notice. We do our best to keep this information current, but it is provided on an “AS IS” basis. It should not be considered, legal, financial, or other professional guidance. For more, see our terms.