Avoiding Tax Return Errors

 

When filing tax returns, there are some common errors that can delay refunds or affect normal processing of a taxpayer’s return. As the extended May 17 deadline for tax returns gets closer, the IRS issued a summary of recommended ways to avoid tax return slipups including the following:

 

  • Report all taxable income.  Underreporting income may lead to penalties and interest.
  • Get names and Social Security numbers right. An individual should enter their name on the tax return exactly as it is printed on the person’s Social Security Card.
  • Determine the right filing status. If taxpayers are unsure of their filing status, the Interactive Tax Assistant on IRS.gov can help them choose the correct status.
  • Answer the virtual currency question correctly. The Form 1040 asks whether at any time during 2020, a person received, sold, sent, exchanged or otherwise acquired any financial interest in any virtual currency. If a taxpayer's only transactions involving virtual currency during 2020 were purchases of virtual currency, they are not required to answer "yes" to the question.
  • Mail paper returns to the right address. If filing a paper return, check IRS.gov for the right address to mail the return.  Due to COVID-19, processing paper returns may take much longer, so taxpayer are encouraged to file electronically if possible.
  • Use the right routing and account numbers when requesting direct deposit of a federal refund.  Incorrect numbers can cause a refund to be delayed or deposited into the wrong account.
  • Sign and date the return.
  • Keep a copy of the signed return and all schedules.
  • Request an extension if needed.  Taxpayers who cannot meet the May 17 deadline can request an automatic filing extension to October 15 by using Form 4868 and prevent late filing penalties. Just remember that while an extension grants additional time to file, tax payments are still due May 17.

Electronic filing is a great way to reduce the chances of tax return mistakes and maximize deductions at the same time. Whether using IRS Free File or other e-file service providers, the tax software automatically applies the latest tax laws and asks taxpayers for all required information.

For more information on avoiding typical tax return errors, read IRS News Release IR-2021-89.

For ministers needing assistance with their federal tax return, a free copy of ECFA’s 2021 Minister’s Tax and Financial Guide is available on the ECFA website.  This easy-to-understand and use tax guide provides the latest tax law changes and cuts through the red tape of tax and finance. ECFA is committed to simplifying the most complex ministers’ tax and financial issues, freeing you to focus on fulfilling the Great Commission.

 

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.