Filing your taxes for the first time can be intimidating, and there’s not much room for error. Even a seemingly simple mistake could bump up your income tax bill or shortchange your refund. In the worst case scenario, a tax-filing flub could lead to an audit. If you’ll be prepping your tax return for the first time this April, here are the most common missteps you’ll need to watch out for.
1. Leaving out Part of Your Income
The IRS has some pretty clear rules on what counts as taxable income and if you’re leaving anything out, you could land yourself in hot water. The most basic kind of income you’re required to report is what you earn from your job. You’ll also need to include any disability benefits and commissions you’ve received.
Beyond that, you’ll have to report things like capital gains from the sale of an investment, severance pay, contest winnings and anything you were paid while serving jury duty. If you’re not sure whether the money you received during the year counts as income, you can find a list of what you need to report on the IRS website.
2. Skipping Over Deductions and Credits
If you’re a new filer, chances are your return is going to be pretty straightforward. That means you’ll probably be taking the standard deduction. However, that doesn’t mean you shouldn’t take the time to run the numbers if you have deductible expenses. For example, you may be able to write off interest on your student loans, business expenses if you’re self-employed or moving expenses if you relocated for a new job.
It’s also wise to look into whether you qualify for any tax credits, which can reduce the taxes you have to pay. For example, the Saver’s Credit is available to lower-income earners who are socking money away into a qualified retirement account. You might be able to claim an education credit as well if you’re paying for college expenses.
3. Forgetting to Proofread Your Return
If you’re doing your own return using a computer software program, you can’t assume that it’s going to automatically get everything right. Just one wrong number can throw everything off course.
Once you’ve punched in your Social Security number, your wage information and your deductions, it’s a good idea to go back and take a second look to make sure they’re all correct. That might add a little time to the task, but it can save you some major headaches if you uncover a mistake.
Check out our federal income tax return calculator.
4. Claiming Tax Breaks You’re Not Eligible for
Aside from missing out on deductions and credits, the next mistake new filers can make is to claim tax breaks for things they don’t actually qualify for. For example, the Earned Income Tax Credit applies to workers who make below a certain amount. If you assume that you’re eligible for it without making sure you meet the criteria, that could spell trouble.
5. Paying Too Much for Tax Prep Services
If you’re worried about getting your tax filing wrong the first time around, you might think you need to spend big bucks on an accountant. But that’s not necessarily the case. There are plenty of low-cost tax software programs you can use. Depending on how much money you make, you might even be able to do your federal taxes for free using one of the IRS free-file options.
Final Word
Attention, new filers: filing your taxes for the first time isn’t as hard as you might think. Making sure you’re organized before you start and not rushing through your return can minimize the odds of making a mistake.
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