10 Common Tax Problems To Avoid

10 Common Tax Problems To Avoid


Tax season can be a very stressful time for everyone who has to file. However, it doesn’t have to be all that bad. Check out our 10 most common tax problems that you can avoid with a little planning.

From fines for unfiled taxes to return delays due to misinformation, tax problems are easy to make and incredibly expensive to resolve. There’s a reason why 26% of Americans hate doing them. Tax problems can be painful, but they don’t have to be. Here are 10 common tax problems to avoid, so you can relax and enjoy a stress-free tax season.

1. Trusting the Wrong Tax Preparer

Every year, taxpayers make the costly mistake of working with incompetent tax preparers who make mistakes, mislead them, commit fraud in their name, and even run off with their refund money. Be suspicious of any tax preparer who promises you a certain refund amount before they review your past tax returns and financial documents. Also, be skeptical of any preparers who base their payment on a percentage of your refund. If someone commits fraud in your name or you ever find yourself wrapped up in any tax crime, make sure to find a lawyer who will step in and advocate on your behalf.

2. Not Filing on Time

The IRS reports that 20% of people fail to file their taxes on time. Failure to file on time can lead to costly penalties and other stressful tax problems. And those who put off filing are more likely to make mistakes on their returns, which can make the process even lengthier and costly. If you’ve failed to file taxes in the past, it’s important to know that your unfiled returns may yield you refunds or credits toward the current year.

3. Not Filing at All

Even if you can’t afford to fully pay your taxes at the moment, you should always file something. Here are two ways to deal with filing issues and tax problems in a more affordable way:

  1. File an Installation Agreement Request: This form lets you outline a payment schedule for your taxes so you can avoid paying for everything upfront. There are interest rates and penalties involved, but those rates are much lower than the rates for not filing.
  2. File an Application for Automatic Extension: This form lets you extend the time to file your income tax return. While this form doesn’t grant you an extension on payments, its interest rates, and penalties are much lower.
4. Making Math Mistakes

Don’t let a tax problem like an addition error keep you from completing your return. Before you submit, double-check your math to make sure information like deductions is added up correctly. Tax preparation software is a useful way to avoid any mathematical mistakes.

5. Creating Tax Problems by Not Filling Out Forms Correctly

One of the most common filing mistakes people make is not double-checking their forms before submitting them. Entering your social security number incorrectly or writing down information illegibly can draw out the filing process and delay receiving your return.

Before you submit:

  • Double-check your social security number.
  • Verify your bank account information and routing numbers.
  • Make sure you date everything correctly and sign anywhere that requires your signature.
  • Also, consider e-filing as it’s a speedier and more cost-efficient method.
6. Not Keeping Up With the Latest Tax News

Keeping up with changes to the tax code isn’t always easy, but it’s important. Some years certain filers are eligible for substantial tax credits they weren’t eligible for the previous year.

By staying informed, you can get more money back, avoid tax problems, and ensure that you’re taking advantage of any benefits that are available to you. Visit IRS.gov to easily access any relevant news regarding tax code updates.

7. Filing for the Wrong Status

How people file their taxes depends on their tax status, as income tax rates and deduction rates differ by individual and group. For example, married couples filing jointly are entitled to double the standard deduction of those who are single, and couples who file separately are subject to different deductions than those who file jointly. Before filing your taxes, determine your tax bracket so you can avoid tax problems and confirm you’re doing everything correctly.

8. Not Keeping a Copy of Your Tax Return

There are a million reasons why you should keep your old tax returns. Keeping a record of your previous returns can help you if any tax problems arise, and is useful when filing an amended return if you made a mistake. Previous tax returns also help tax professionals, lawyers, and the IRS deal with issues like tax fraud investigations and other tax problems.

9. Overpaying

Every year taxpayers overpay their taxes by not taking advantage of deductions they’re entitled to. It’s important to note that expenses like medical and dental costs, charitable donations, and job expenses are tax deductible, which means you could save big by reporting them. Make a list of any possible deductions and pay close to any that may apply to you. It may help lower your taxable income.

10. Filing the Wrong Tax Forms or Failing to Correct Them

Before you file, make sure you’re filling out the form that is most appropriate to your tax situation. Form 1040 is great for those who are self-employed or need to do itemized deductions, whereas Form 1040EZ is an easy form for those with a simpler tax situation.

If there are errors on your W-2 Forms or other financial forms, make sure you address them sooner rather than later, or else the IRS will become involved. If you’re filing electronically, make sure you validate your electronic tax return correctly and verify all your information is correct.

What to Do When There’s a Problem

While this list may be a great way to avoid common tax problems, chances are you may one day find yourself in one of these situations. If you ever have a tax problem like a federal tax lien, or just want to know more about any legal implications, get in touch with a tax expert who can give you more information or help resolve your issue.

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