The Internal Revenue Service (IRS) issued a reminder to taxpayers today about avoiding frequent tax return mistakes. The IRS noticed several typical errors this filing season, including some taxpayers claiming inaccurate amounts of the Recovery Rebate Credit and Child Tax Credit.
There are a few crucial measures to avoid errors on these popular credits. Not only can claiming inaccurate tax credit amounts cause delays with the IRS, but it can also result in refund adjustments. To file a valid tax return, taxpayers should refer to Letter 6419 for advance Child Tax Credit payments and Letter 6475 for third Economic Impact Payment amounts received– or their Online Account.
Below are other simple techniques to avoid frequent blunders noticed this tax season.
- Electronically file your documents. To assist reduce errors, taxpayers can submit their taxes electronically using their computer, smartphone, or tablet, whether through IRS Free File or other e-file service providers. Tax software uses a question-and-answer structure to walk customers through each tax return component. Carefully fill out the form. Any information required to compute credits and deductions is included here. Tax software should help taxpayers avoid math errors, but they should always double-check their returns for correctness.
- Make sure you’re using the correct filing status. If a taxpayer is unclear about their filing status, the Interactive Tax Assistant on IRS.gov can assist them in selecting the correct position, mainly if multiple filing statuses apply. Tax software, such as IRS Free File, can also help you avoid mistakes while deciding on a filing status for your tax return.
- Answer the question on virtual currency. Forms 1040 and 1040-SR for 2021 question if a person received, sold, swapped, or otherwise disposed of any financial interest in any virtual currency during the year. This field should not be left blank; instead, taxpayers should check “Yes” or “No.”
- All taxable income must be reported. Penalties and interest may be imposed if payment is underreported. Before beginning a tax return, taxpayers should have all their income documentation on hand. Tax records that are well-organized help avoid errors that cause processing delays and may also aid in the discovery of previously ignored deductions or credits. Forms W-2, 1099-MISC, and 1099-NEC are examples.
- Include unemployment benefits in your calculations. According to the IRS, people are not counting the unemployment benefits they received in 2021 on their tax returns. Unemployment compensation was exempt from taxes in 2020 due to a unique law. However, it was only for that year. Unemployment compensation was normally taxable in 2021. Therefore taxpayers should report it as income on their tax returns.
- Check the spelling of your name, birth date, and Social Security number. On their individual income tax return, taxpayers must correctly record the name, Social Security number (SSN), and date of birth of each person they claim as a dependant. On a tax return, enter each SSN and individual’s name precisely as they appear on the Social Security card. If a dependant or spouse does not have a Social Security number (SSN) and is not qualified to obtain one, use the Individual Tax Identification Number (ITIN) instead.
- Check the routing and account numbers twice. Direct deposit of a federal refund into one, two, or even three accounts is handy and expedites the taxpayer’s access to funds. Check the accuracy of the financial institution routing and account numbers on the return. Refunds can be delayed or transferred into the wrong account if the numbers are incorrect. Taxpayers can also buy US Savings Bonds with their refund.
- Return paper to the correct address. To avoid processing delays, paper filers should double-check the correct address for where to file on IRS.gov or the form instructions. It’s essential to remember that processing paper tax returns may take significantly longer than usual. If possible, taxpayers and tax experts are advised to file electronically.
- The return must be signed and dated. Both spouses must sign and date a joint return if filed jointly. E-filers can sign using a personal identification number they want (PIN). If their 2020 return has not yet been finalized, taxpayers should review the special instructions to confirm their 2021 electronic tax return.
- Make a copy. Taxpayers should copy their signed returns and all schedules for their records when they are ready to submit.
- If necessary, request an extension. Use Form 4868 or Free File. However, keep in mind that, while an extension gives you more time to file, most taxpayers’ tax payments are due on April 18. Taxpayers who cannot meet the April 18 deadline can quickly obtain a six-month extension until October 17 to avoid late filing penalties.
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