Top Tax Mistakes and How to Avoid Them

1. Missing or Incorrect Personal Information

Even small errors like a mistyped Social Security Number (SSN), misspelled names, or wrong bank routing numbers can cause big headaches. The IRS uses your SSN to match your tax return with your income documents. If it doesn’t match, your return may be flagged for review, delaying your refund or triggering a request for clarification. Incorrect bank info can lead to failed direct deposits.

Tip: Carefully review every piece of personal data on your tax forms. If you’re filing electronically, tax software often flags obvious mistakes. When in doubt, a tax professional can ensure accuracy.

2. Filing With the Wrong Status

Your filing status influences your tax brackets, standard deductions, and eligibility for various credits. Common statuses include Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er).

Choosing the wrong status can mean paying more taxes than necessary or missing out on benefits. For example, someone who qualifies as Head of Household might have a larger deduction and lower tax rate than filing as Single.

Tip: Review IRS guidelines or consult a tax expert to determine the most beneficial status for your situation, especially if your marital status changed during the year or if you have dependents.

3. Forgetting to Report All Income

All income you receive—whether from a job, freelance work, rental properties, dividends, or other sources—must be reported. Failure to report all income can lead to penalties, interest, or audits.

The IRS receives copies of many income documents like 1099s and W-2s, so missing income is often caught.

Tip: Keep thorough records of all earnings. If you have side jobs or investments, keep track of payments received and compare them against your tax forms to ensure everything is reported.

4. Neglecting to Claim Eligible Deductions and Credits

Tax deductions reduce your taxable income, while credits directly reduce your tax bill. Missing out on these means you’re paying more than necessary.

Common deductions include mortgage interest, student loan interest, and medical expenses. Popular credits include the Earned Income Tax Credit (EITC), Child Tax Credit, and education credits.

Tip: Stay informed about what deductions and credits you qualify for each year. Tax laws can change, so using a tax professional or software that updates yearly can help you capture all savings.

5. Not Paying Estimated Taxes

If you’re self-employed or have significant income not subject to withholding (like rental income, investments, or gig work), you need to pay estimated taxes quarterly to avoid penalties.

Failing to do so results in underpayment penalties and possible interest charges.

Tip: Estimate your annual tax liability and divide it into quarterly payments. Use IRS Form 1040-ES or consult a tax advisor. Track your income regularly and adjust payments as needed.

6. Ignoring Deadlines

The IRS charges penalties for late filing and late payments. Missing the April 15 deadline or the quarterly estimated tax due dates can cost you extra money.

Tip: Mark key tax deadlines on your calendar or set reminders. If you need more time to file, submit an extension request by the deadline to avoid late-filing penalties. However, remember that an extension to file is not an extension to pay any taxes owed.

7. Incorrectly Reporting Retirement Distributions

Early withdrawals from retirement accounts (before age 59½) often come with a 10% penalty and must be reported correctly. Failure to do so can result in IRS notices and additional taxes owed.

Also, some distributions may be taxable while others aren’t, depending on the account type.

Tip: Keep all IRS Form 1099-R statements and understand your retirement account rules. Consult a tax professional if you’re unsure how to report these distributions.

8. Overlooking State Taxes

Federal and state tax systems differ widely. Many taxpayers focus only on federal taxes and forget about their state obligations.

Not filing state tax returns or failing to pay state taxes can cause fines and legal issues.

Tip: Research your state’s tax rules or work with a professional who understands both federal and state tax systems. Don’t forget local taxes, which may also apply.

9. Poor Record Keeping

Good records support your tax return claims and are crucial if you ever face an audit. Missing receipts, mileage logs, or invoices can lead to disallowed deductions and penalties.

Tip: Organize your tax-related documents throughout the year. Use digital tools, folders, or apps to keep track of income and expenses. Store documents for at least three years.

10. Failing to Review Your Return Before Filing

Rushing through your tax return increases the chance of errors that could cost you money or cause delays.

Tip: Take the time to review every line of your tax return before submitting. Use tax software’s review tools or have a professional double-check your return.