Stupid Tax Return Mistakes That Will Get You Audited
It's tax season, and that means it's time to start tearing your hair out. Maybe you're worried about owing the IRS. Maybe you're worried about an audit. Maybe you're trying to balance one fear against another. Don't. It can lead to stupid mistakes that will get you audited, creating a whole other set of problems — and mounting anxiety. Here are the small and silly mistakes that make up a big chunk of why people get audited. (See also: 10 Red Flags That Trigger Audits)
Entering the Wrong SSN
This is perhaps the king of stupid mistakes on your tax return: putting down the wrong Social Security Number. If you put down the wrong SSN, your income isn't going to match what it should and the IRS is going to notice. Sound like too stupid of a mistake to make? It's not. In fact, it's one of the most common mistakes out there, along with the next one.
Not Checking Your Math
This is becoming a decreasing problem now that so few people prepare their taxes by themselves and by hand. Still, even if you're using a tax preparing program, you're entering information by hand, such as adding up every deduction in a single category together. Always double check your math, just like your teachers told you to do. Ignoring this step can lead to a simple stupid mistake and an audit that can cost you a ton of time and money, as well as create a lot of stress.
Another way to avoid this stupid mistake is to hire a tax preparer, but be careful...
Using a Dubious Preparer
If you have someone offering you big returns, that can be a red flag. The reason being, you're only entitled to so much of a return, regardless of who prepares your taxes. A genius tax preparer is just someone who knows all of the deductions that you're entitled to and can help you claim all of them. On the other hand, a tax preparer with a flimsy regard for the law might fudge the numbers or shunt money off into tax deductions you're not actually entitled to. Doing that isn't smart business, it's playing Russian roulette with your finances. (See also: 5 Things Tax Preparers Should Tell You)
Bragging About Ill-Gotten Gains
Another big surprise: People often out themselves when it comes to cheating on their taxes. Even if you're not doing anything illegal, talking about your tax return to the wrong people can be a big mistake. In the first case, it's no one's business. More than that, however, the IRS gets thousands of reports from confidential informants who are rewarded with a handsome bounty for the funds recovered. Keep mum about your tax return and don't give anyone anything to use against you.
Deducting "Creative" Donations
Donating is great, but it's not great to be creative and fudge how much you donated throughout the course of the year. (See also: Surprising Charitable Tax Deductions)
This is a good place to put it in no uncertain terms: Be as truthful on your tax return as possible. If we were going to boil some of these down to a single stupid mistake it would be "lying to get a slightly larger return."
Don't guess, especially not when it comes to investments, dividends, interest, and other unearned income. If you do, you're likely to get it wrong. If you don't guess, the only thing that might trigger an audit is the bad math that we talked about earlier and that's another factor that's totally within your control. Remember that this type of income is taxed differently, so it's effectively like filling out a whole other tax form — and the IRS wants you to get it right. (See also: Tax Document Checklist)
Claiming Hobbies as a Business
One of the biggest ways that a self-employed person gets audited is by only pretending to be self-employed. Generally, to consider a hobby a business, it needs to make money. While the IRS will tolerate some losses while you're getting started, they're not going to let you claim to be a tennis instructor when you're losing thousands of dollars doing it every year. Be honest about what is a hobby and what is a business to avoid getting an audit letter this year.
Any stupid tax mistakes I've missed? Please enter them in comments so that the rest of us can audit them!