DIY Tax Software Mistakes
As tax season rolls around, many people turn to DIY tax software to file their taxes. These programs can be a convenient and cost-effective way to file your taxes, but they also come with some risks. One of the biggest risks of using a DIY tax program is the possibility of making mistakes that could cost you money or even get you in trouble with the IRS.
Here are some common mistakes people make when using DIY tax software:
- Entering incorrect information
One of the most common mistakes people make when using DIY tax software is entering incorrect information. This could be as simple as mistyping a number or forgetting to include a piece of income, but even small mistakes can lead to big problems. For example, if you enter an incorrect Social Security number or misspell your name, your tax return may be rejected by the IRS.
- Missing deductions or credits
DIY tax programs can be helpful in identifying deductions and credits you may be eligible for, but they are not foolproof. If you overlook a deduction or credit that you are entitled to, you could end up paying more in taxes than necessary. Similarly, if you claim a deduction or credit that you are not eligible for, you could face penalties or even an audit.
- Filing the wrong forms
DIY tax programs typically guide you through the process of selecting the correct tax forms to file, but it’s still possible to select the wrong forms. This could result in your tax return being rejected or delayed, or even result in penalties if you file the wrong forms intentionally.
- Failing to report all income
It’s important to report all of your income on your tax return, even if you didn’t receive a W-2 or 1099 form for it. This includes income from freelance work, rental properties, and investments. If you fail to report all of your income, you could face penalties or even an audit.
- Not double-checking your work
Even if you use a DIY tax program, it’s important to double-check your work before submitting your tax return. Review all of the information you entered to ensure it is accurate and complete. You may also want to consider having someone else review your tax return to catch any errors you may have missed.
- Not understanding the tax code
Just because you may have used a DIY tax program with no problems in the past does not mean the risks are over. Every year comes with its own set of risks. Ask any tax professional how often they see serious mistakes on tax returns prepared on DIY tax programs and you’re sure to get loads of stories. Whether it’s mixing up deductible mortgage interest and taxable interest income or expensing business items incorrectly, mistakes happen. It’s hard to double check your tax return for accuracy when you don’t know the code. If you have concerns about any given item on your tax return, be sure to check the instructions on the form. Generally speaking, the instructions for any form are very easy to read.
DIY tax software can be a viable way to file your taxes, but they come with some hefty risks. To avoid making costly mistakes on your tax return, be sure to enter all information accurately, claim all deductions and credits you are entitled to, file the correct forms, report all of your income, read up on tax code, and double-check your work before submitting your tax return. If you’re unsure about any aspect of your tax return, consider consulting with a tax professional for guidance.
Posted: May 8, 2023