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Common and costly errors taxpayers should avoid when preparing a tax return
Electronically filing a tax return reduces errors because the tax software does the math, flags common errors and prompts taxpayers for missing information. It can also help taxpayers claim valuable credits and deductions.
Using a reputable tax preparer – including certified public accountants, enrolled agents or other knowledgeable tax professionals – can also help avoid errors.
The IRS urges all taxpayers to file electronically and choose direct deposit to get their refund faster and avoid pandemic-related paper delays. IRS Free File offers online tax preparation, direct deposit of refunds and electronic filing, all for free. Some options are available in Spanish.
Here are some common errors taxpayers should avoid when preparing a tax return:
• Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.
• Misspelled names. Likewise, a name listed on a tax return should match the name on that person’s Social Security card.
• Incorrect filing status. Some taxpayers choose the wrong filing status. The Interactive Tax Assistant on IRS.gov can help taxpayers choose the correct status especially if more than one filing status applies. Tax software also helps prevent mistakes with filing status.
• Math mistakes. Math errors are some of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, tax prep software does it automatically.
• Figuring credits or deductions. Taxpayers can make mistakes figuring things like their earned income tax credit, child and dependent care credit, and recovery rebate credit. If someone is eligible for a recovery rebate credit – and either didn’t receive Economic Impact Payments or received less than the full amounts – they must file a 2020 tax return to claim the credit even if they don’t usually file. The Interactive Tax Assistant can help determine if a taxpayer is eligible for tax credits or deductions. Tax software will calculate these credits and deductions and include any required forms and schedules.
• Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit. This is the fastest way for a taxpayer to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax return.
• Unsigned forms. An unsigned tax return isn’t valid. In most cases, both spouses must sign a joint return. Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney. Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS.
• Filing with an expired individual tax identification number. If a taxpayer’s ITIN is expired, they should go ahead and file using the expired number. The IRS will process that return and treat it as a return filed on time. However, the IRS won’t allow any exemptions or credits to a return filed with an expired ITIN. Taxpayers will receive a notice telling the taxpayer to renew their number. Once the taxpayer renews the ITIN, the IRS will process return normally.
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What taxpayers need to know to claim the earned income tax credit
The earned income tax credit can give qualifying workers with low-to-moderate income a substantial financial boost. In 2019, the average amount of this credit was $2,476. It not only reduces the amount of tax someone owes but may give them a refund even if they don’t owe any taxes or aren’t required to file a return. People must meet certain requirements and file a federal tax return in order to receive this credit.
EITC eligibility
• A taxpayer’s eligibility for the credit may change from year to year, so it’s a good idea for people to use the EITC Assistant to find out if they qualify.
• Eligibility can be affected by major life changes such as:
o a new job or loss of a job
o unemployment benefits
o a change in income
o a change in marital status
o the birth or death of a child
o a change in a spouse’s employment situation
• Taxpayers qualify based on their income and the filing status they use on their tax return. The credit can be more if they have one or more children who live with them for more than half the year and meet other requirements.
New this tax season
There’s a new rule to help people impacted by a job loss or change in income in 2020. taxpayers can use their2019 earned income to figure your EITC, if their 2019 earned income was more than their 2020 earned income. The same is true for the additional child tax credit. For details, see the instructions for Form 1040.
2020 Maximum credit amounts allowed
The maximum credit amounts are based on whether the taxpayer can claim a child for the credit and the number of children claimed:
• Zero children: $538
• One child: $3,584
• Two children: $5,920
• Three or more children: $6,660
2020 income limits
Those who are working and earn less than these amounts may qualify for the EITC:
Married filing jointly:
• Zero children: $21,710
• One child: $47,646
• Two children: $53,330
• Three or more children: $56,844
Head of household and single:
• Zero children: $15,820
• One child: $41,756
• Two children: $47,440
• Three or more children: $50,954
Taxpayers who are married filing separately can’t claim EITC.
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Tax resources for military members, veterans and their families
The IRS has a variety of resources to help members of the military, veterans and their families navigate the unique and sometimes complex circumstances that come with filing taxes while in the military.
Here’s a list of some of the resources these taxpayers may find helpful.
• Tax Information for Members of the Military is the main page on IRS.gov where people can go to find links to helpful info, resources and services.
• It’s very important that members of the military know the rules for service. This can be done by email.
• A taxpayer’s military status affects whether they are eligible for certain benefits. Taxpayers can check their eligibility for military tax benefits by visiting IRS.gov. Qualifying employers include the Armed Forces, uniformed services and support organizations.
• There are rules specific to those who serve in combat zones. These taxpayers and their families can find out more on the Tax Exclusion for Combat Service page of IRS.gov. They should also review special EITC rules. If these apply to their tax situation, it could lead to a larger refund.
• The Armed Forces’ Tax Guide is a comprehensive publication with info for military members. This includes:
o Special rules for military personnel serving abroad including deadline extensions
o Unreimbursed moving expenses
o Reserve component travel expenses
• Members of the military and qualifying veterans can prepare and e-file their taxes for free through MilTax. Taxpayers who do not qualify for MilTax have other options to prepare and e-file their federal taxes for free. Those who earned less than $72,000 in 2020 can use IRS Free File software. Any taxpayer, regardless of income, who is comfortable completing their tax forms digitally can use Free File Fillable Forms.
• Most military posts offer free income tax assistance through the military Volunteer Income Tax Assistance program. Military service members can contact their installation’s legal office for details. Veterans may also qualify for free tax help at locations nationwide. They just have to meet income or age requirements.
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2021 tax filing season set to begin February 12
The IRS will begin accepting and processing 2020 tax year returns on Friday, Feb.12, 2021.
People who are ready to file can begin filing their tax returns with tax prep software, including IRS Free File. Software providers are accepting completed tax returns now and holding them until the IRS begins processing returns on Friday, Feb.12. The quickest way for taxpayers to get a tax refund is by filing electronically and choosing direct deposit for their refund.
Most earned income tax credit or advanced child tax credit related refunds should be available in taxpayer bank accounts or on debit cards by the first week of March, if they choose direct deposit and there are no other issues with their tax return.
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the earned income tax credit or ACTC. The IRS must hold the entire refund — even the portion not associated with EITC or ACTC. This helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.
To make filing easier, taxpayers should:
• File electronically and use direct deposit for the quickest refunds.
• Check IRS.gov for the latest tax information. There is no need to call the IRS.
Those who may have been eligible for stimulus payments should carefully review their eligibility for the recovery rebate credit. Most people received Economic Impact Payments automatically and those who received the maximum amount don’t need to include any information about their payments when they file.
They received the full amounts of both Economic Impact Payments if:
• Their first Economic Impact Payment was $1,200 for individuals; $2,400 married filing jointly for 2020, plus $500 for each qualifying child born in 2020.
• Their second Economic Impact Payment was $600 for individuals; $1,200 married filing jointly for 2020, plus $600 for each qualifying child born in 2020.
People who didn’t receive the payments or only received partial payments may be eligible to claim the recovery rebate credit when they file their 2020 tax return, even if they are normally not required to file a tax return. Tax preparation software, including IRS Free File, will help taxpayers figure the amount.
Taxpayers should remember that stimulus payments they received are not taxable, and don’t reduce the amount of their refund.
Important filing season dates
Friday, Feb. 12. IRS begins 2021 tax season. Individual tax returns start being accepted, and processing begins.
Thursday, April 15. Due date for filing 2020 tax returns or requesting extension of time to file.
Thursday, April 15. Due date for paying 2020 tax owed to avoid owing interest and penalties.
Friday, Oct. 15. Due date to file for those requesting an extension on their 2020 tax returns.
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