First, the good news: This year you have a few extra days to file your taxes. The government has moved the deadline from Friday, April 15, to Monday, April 18, 2018. (Emancipation Day—the day Abraham Lincoln abolished slavery—is a holiday in Washington D.C., and is observed on April 15 this year, giving you three extra days to get your taxes in.)
Now the not so good news: You still have to do your taxes. And if you’re like one-third of other Americans, according to the IRS, you’re filing your taxes at the last minute.
“The biggest mistake people make when they file late is not being organized,” says Nathan Rigney, senior tax research analyst at The Tax Institute at H&R Block. “Being disorganized can cause you to misreport income or forget about a deduction.” His suggestion: Take some time to get all your documents together in one place. That includes any W2 or 1099 forms you’ve received for income from your job, withdrawing money from retirement funds, or interest and dividends earned on investments. You should also gather any records of expenses that might be deductible, as well as receipts from medical bills.
Once you’ve got your documents squared away, make sure you side-step these other common mistakes:
1. Not taking all your deductions
Lots of people know there are deductions you can take if you own your home or make charitable contributions, but there are other lesser-known deductions to take advantage of. “There are deductions people can take if they’ve taken educational courses, teachers can take a dedication for buying materials for their classroom, and if you’re switching jobs within the same field, there are some job-related deductions you can take,” says Lydia Vercelli, a certified public accountant at Perelson Weiner in New York City. “Some people also don’t know they can deduct job hunting expenses.” To see the IRS’s full list of deductions, click here.
2. Forgetting to sign the forms
It’s easy to miss the signature box on the bottom of the form, but if you miss it, that will delay your taxes from being processed, and may result in late filing penalties if you fail to sign and resubmit the return. Turns out, people who file by paper make 20 times more errors on their tax forms than efilers. The best thing to do to avoid forgetting your signature is to file your taxes online, where the software will prompt you to sign with a self-selected personal identification number (PIN).
3. Switching Social Security numbers
Another common mistake, says Rigney, is when a couple files together and they sometimes write down their Social Security numbers in the wrong boxes, or people transpose numbers by accident. “The IRS will reject your return if the Social Security numbers are incorrect or they’ll send you a letter notifying you that they made an adjustment to your tax liability if you made a mistake transposing numbers,” says Rigney.
If you’ve e-filed the return, you can usually correct the number and resubmit the return. Otherwise, if it’s your mistake, follow the directions on the letter from the IRS and correct it. “But if you get a letter and you think it’s not accurate, the important thing is to communicate with the IRS and your tax preparer. Otherwise the IRS may assess additional taxes and assume you are wrong.” Whenever you have a problem with your taxes, don’t ignore it, call your tax preparer or the IRS and talk to them. “They will work with you to fix the problem,” Rigney says.
4. Missing the deadline.
Missing the filing deadline is pretty big deal, and could mean paying substantial penalties. If you fail to file by the deadline and owe money, the balance you didn’t pay will accrue interest at a rate of 4 percent per year, as well as a combination late filing/late payment penalty of 5 percent of your balance due for each month you fail to file and pay. The better thing to do is to file an extension form, which gives you until October 15, 2018, to pay your taxes, but by April 18, try to pay as much as you can of the balance due. If you file for an extension and pay at least 90 percent of what’s due, you will still pay interest on what you owe, but you’ll avoid the late payment penalty as long as you pay the remaining balance by October 15.
One more thing: If you can’t pay within 120 days (the limit for short-term extension to pay balance due), you can request an installment agreement which can allow you to pay over 72 months. There’s an application fee of $120. (But if you do direct debit, the application fee drops to $52 and late payment fee reduces to a quarter of a percent.) Keep in mind you’ll still be accruing interest. “For people who get hit with a large unexpected tax bill they might really need this installment program,” says Rigney. However, don’t extend just because you feel like taking more time. If you end up owing taxes the next year, you’ll be paying on two years.
5. Failing to report income
Sometimes you forget about that extra project you received a fee for, or other income you made during the year. You may forget, but the IRS doesn’t and they have a record of all income that falls under your Social Security number. If you fail to report income that was reported on a 1099, you’ll get a letter from IRS saying you owe additional taxes, and they’ll assess interest and a failure to pay penalty of half a percent, so you’ll end up paying extra for your mistake.
6. Forgetting attachments
If you’re filing by mail, you’ll need to attach your W2 and other documents that “substantiate any withholdings,” says Vercelli. If the documents aren’t attached to the form, your filing will be considered incomplete. The IRS will send a letter notifying you of the missing W-2. There will not be penalty assessed as long as you attach the W-2 to the letter and send it to the IRS.
If you do make a mistake on your taxes…
…reach out to your tax preparer as soon as possible, if you used one. If the mistake resulted in an overpayment of tax, you can file an amended return to claim a refund. If the mistake resulted in your paying too little, you can avoid costly interest and penalties by correcting the mistake sooner rather than later.
As for next year, “If you do make a mistake this year, use it as a learning experience and get organized earlier next year,” says Rigney. Vercelli agrees. “The best time to do your taxes is the end of February or the beginning of March,” she says. “The IRS is still not inundated then, and you’ll get your refund quicker.”