Tax laws change every year, and a mistake could end up costing you money, or worse — you could be accused of tax fraud. Below are five unintentional errors you might be making that could make the IRS look twice.
Missing or incorrect information
An omission of vital data, like a Social Security number, will almost certainly cause delays. A simple oversight, like putting your deductions on the wrong line, might prompt a deeper investigation. If you have to pay out, and a mistake on the wrong line ends up changing it to a refund, it could be misinterpreted as tax fraud.
Odds are, unless it happens on a regular basis, accidentally writing down a deduction of $25,000 in mortgage interest when you meant to say $2,500 won't label you as a criminal. Still, it's good practice to double-check every figure before committing it to a tax return. You definitely don't want to miscalculate your total income. This is where tax software really helps you out by pointing out inconsistencies. Auditors know that calculations can get mixed up, and they're trained to know what to look for.
Using the wrong type of return
You might have been in a rush to grab that 1040 from your local post office, but double-check before you send it off. A 1040EZ form is an easy thing to mix up, and it could mean a substantial difference in what you're actually claiming.
Claiming the wrong deduction
Deduction rules vary by type, but they can easily be misunderstood. Make sure you double-check the rules for each one before claiming it to avoid looking suspicious.
If you earned less than $400 from contract or freelance work, you don't actually have to list it under income. The problem is when you take into account overseas gains. The myth of offshore banking is that it hides assets from the government. However, you're actually required to disclose and report foreign income. That rental property in Costa Rica might not be on the IRS' radar immediately, but if you fail to disclose it, you could be looking at a stiff penalty. The good news is that the IRS doesn't consider accidental mistakes as fraud. A case for intention has to be made before the IRS actually charges you with a crime. Even so, mistakes can cost you a refund at best and a fine at worse. You could face penalties and become a blip on the IRS' radar for future returns.