Updated: May 19, 2024

10 Mistakes to Avoid This Tax Season

Ten major tax mistakes to avoid and how you can avoid them.
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We already wrote about 10 red flags that may attract the IRS' attention -- but which mistakes are the most common? And which are the most foolish? There are a few mistakes that keep occurring and reoccurring, and some of the hassle isn't even due to mistakes, but rather, to the type of worker an individual is and how much income they report.

If you're interesting in knowing the big mistakes to avoid, here are some of the most careless tax pitfalls not to fall victim to this year.

1. Incorrect Social Security number

According to Thomas Cooke, Professor of Accounting and Business Law at Georgetown University, the prevalence of social security mistakes on tax forms is flabbergasting. "The number one mistake is not putting down the right Social Security numbers, and the second is not doing the right math," said Cooke. Knowing your true Social Security number will put you ahead of the curve, so be sure to enter the correct number, and if you need help, visit this government site on everything to do with social security.

2. Doing the math wrong

Upon first glance, adding numbers incorrectly doesn't seem worthy of being mentioned as a significant error, especially with digital tax programs that are readily available. However, due to simple human error, this mistake continues to be made. When you finish preparing your taxes, double check your work with fresh eyes the next day or run it through a free tax program as a check. However, since data entry is still a part of the process, even with programs, you may want to get your spouse or relative to take a look when you're done.

3. Being a high earner

Did you know that taxpayers that make over $1 million a year are more likely to be audited? It's because the rich tend to make more deductions, as well as donate large amounts to charities and other activities. Obviously being a high earner isn't a mistake, however, based on status alone, they raise more red flags, so if you're in a high tax bracket, be cognizant of the fact that you may be audited simply due to your income.

4. Being a contractor or business owner

Depending on who you ask, contractors are more likely to be audited than the average employee, but all experts agree that the self-employed are more likely to be questioned on their tax forms.

According to Thomas Jensen, a managing partner at Vaerdi Financial, the self-employed are at risk of being audited simply due to their employment status. Jensen said. “Any filer who files a Schedule C is about four times more likely to receive questions.”

According to accountant David Wolfson, the IRS has always looked through Schedule C filers more vigilantly, and those with "incomes of more than $100,000 have a five times greater likelihood of being audited than those who do not file a Schedule C."

So why is this?

A good number of taxpayers use hobbies as a business in order to deduct losses, which makes life a lot more challenging for actual individuals who are self-employed. For this reason, the IRS reviews the forms of the self-employed critically, and individuals who are found to deduct losses for years on end are questioned, since a business would logically be making money, not losing it.

5. Filing with a pen and paper

For some reason, handwritten returns are treated warily by the IRS. Apparently these returns are more likely to be erroneous, which happens much less when technology is used. According to Kathy Pickering, the Executive Director of The Tax Tax Institute at H&R Block, 9.4 million individuals made math errors on their forms for the 2010 filing year.

6. Claiming a credit you don't deserve

The Earned Income Tax Credit was designed to reduce tax burdens on taxpayers earning a low to moderate income, and can help those individuals receive money back, if the credit is larger than the amount of taxes they owe. However, many taxpayers abuse the system by making deductions or not claiming income that should be taxed. Bogus tax scammers cost the U.S. $13.6 billion in 2012. However, the IRS has been catching up with these fraudulent returns and in 2010, audits related to EITCs constituted over 30 percent of individual audits.

7. Rounding up

Typically, taxpayers will round their estimations in their favor. The IRS is aware of this, so or this reason, it's in your best interest to write in specific numbers as opposed to rounded guesses.

8. Using a shady tax preparer

Shady tax preparers won't be doing you any favors. Good tax preparers get you what you're entitled through their knowledge of deductions and ability to help you claim them. Eager preparers who are sloppy may skirt around the numbers and funnel your money around through bogus tax deductions. Though you may not be at fault, you may be audited, so go to a reputable tax preparer or do it yourself.

9. Having income that clashes with what your employer reports

One easy way of being flagged is by reporting a different income than what your employer has reported. This goes for freelancer workers who file 1099s, as well as employees who use W-2s. Make sure your numbers match theirs!

10. Telling people that you're cheating the system

Informants get paid when they snitch on someone to the IRS. In fact, the IRS advertises a reward of up to 30 percent on additional taxes and penalties they collect from tax evaders. Therefore, avoid giving people a reason to report you, and be very careful with your tax information, lest someone turns you in!

The good news is that 99 percent of individual income tax returns are free and clear and make it safely past the IRS audit machine inspection.

Though tax time might be stressful, most likely you'll sail right through to the finish line and won't have to deal with Uncle Sam for a whole 'nother year.

Related Stories:

Tips to Avoid a Tax Audit by the IRS

10 IRS Audit Red Flags