March 12, 2025

Are You Making These Tax Missteps?

Are You Making These Tax Missteps?

Self-Filing Taxes: Are You Making These Painfully Common Errors That Could Land You in Trouble with the IRS?

As Christians, we are called to be good stewards of our resources, and that includes being responsible with our taxes. This principle of stewardship is deeply rooted in scripture, as we are entrusted with God's blessings to manage them wisely and faithfully (Matthew 25:14-30). [While the tax code can be complex and intimidating, many of us choose to self-file our taxes to save money or maintain greater control over our finances. However, it's crucial to be aware of common tax filing errors that could lead to penalties, interest charges, or even an IRS audit. Are You Making These Tax Missteps?

Here, we'll explore some of the most common tax filing errors and provide practical tips on how to avoid them. By understanding these pitfalls, you can confidently navigate the tax season and ensure you're fulfilling your obligations while staying in good standing with the IRS.

Check out the full podcast episode:

Common Tax Filing Errors

1. Incorrect Filing Status 1

Choosing the wrong filing status can significantly impact your tax liability. Filing statuses like Single, Married Filing Jointly, or Head of Household have different tax brackets and standard deduction amounts. Selecting the incorrect status could result in paying more taxes than necessary or receiving a smaller refund2. For instance, if you qualify as Head of Household but file as Single, you might miss out on a larger standard deduction and more favorable tax rates1.

To avoid this error, carefully review the IRS guidelines on filing statuses and use resources like the IRS Interactive Tax Assistant to determine the correct status for your situation2.

2. Inaccurate Information 1

Mistakes in entering personal information, such as your name, Social Security number, address, or bank account details, can cause processing delays and potential issues with your refund3. For example, if you misspell your name or enter an incorrect Social Security number, the IRS may take longer to process your return, delaying any refund you may be expecting1. If you've moved, it's crucial to update your address with the IRS to ensure you receive important correspondence and your refund without delay6.

It's also important to include copies of all required documents when filing, whether electronically or by mail5. This includes forms like W-2s, 1099s, and any supporting documentation for deductions or credits.

If you have an Individual Tax Identification Number (ITIN) that has expired, don't delay filing your return. You should still file using the expired number and then take steps to renew it. This will prevent processing delays and ensure your return is considered filed on time4.

To prevent these errors, double-check all information you enter on your tax forms, especially essential details like your Social Security number and bank account information1. Consider using tax software, which can often pre-fill some of this information from your previous returns, reducing the risk of errors7., tax software provider documentation]

3. Math Errors 1

Simple mathematical errors are surprisingly common and can lead to an incorrect tax calculation3. These errors can result in either overpaying or underpaying your taxes, potentially leading to penalties and interest charges2.

While tax software can help with calculations, it's still essential to double-check all the numbers and ensure accuracy1. If you're unsure about any calculations, consider seeking assistance from a tax professional5.

4. Missing or Incorrect Deductions and Credits 2

Many taxpayers overlook valuable deductions and credits they are eligible for, resulting in a higher tax liability or a smaller refund2. On the other hand, claiming deductions or credits you don't qualify for can lead to penalties and interest charges2. For example, if you try to deduct 100% of your personal vehicle as a business expense without proper documentation and justification, it could raise a red flag with the IRS and potentially trigger an audit9.

To avoid these errors, thoroughly research potential deductions and credits, such as the Child Tax Credit, Earned Income Tax Credit, or deductions for charitable contributions and medical expenses1. Ensure you meet the eligibility criteria for each deduction or credit before claiming it on your return2.

It's also crucial to report all income sources accurately, including those from online platforms, investments, and part-time work10. Failing to report all income can lead to significant issues with the IRS.

5. Unsigned or Incomplete Returns 1

Forgetting to sign your tax return makes it invalid3. While the IRS may request missing information, it doesn't necessarily invalidate the return11. However, missing information can lead to further inquiries and delays in processing5.

Before submitting your return, carefully review it to ensure all necessary sections are completed, all required forms are attached, and you have signed and dated the return5. If filing jointly, ensure both spouses have signed the return1.

6. Filing Too Early or Too Late 1

Filing too early could mean you haven't received all the necessary tax documents, potentially leading to errors or missed deductions1. Filing late can result in penalties and interest charges, especially if you owe taxes5.

If you're a freelancer or self-employed, remember that you're generally required to file estimated taxes quarterly. This is because you don't have taxes automatically withheld from your income, and the IRS expects you to pay taxes throughout the year rather than all at once at tax time5.

To avoid these issues, gather all your tax documents before filing and ensure you submit your return by the tax deadline5. If you need more time to prepare your return, you can request an extension to file, but remember that this doesn't extend the deadline to pay any taxes owed5.

Consequences of Tax Filing Errors 12

Tax filing errors can have various consequences, ranging from minor inconveniences to severe penalties. Some of the potential repercussions include:

  • Processing Delays: Errors in your return can cause the IRS to take longer to process it, delaying any refund you may be expecting12. This can be frustrating, especially if you're relying on that refund for important expenses.
  • Penalties and Interest: Filing late, underpaying taxes, or claiming ineligible deductions can result in penalties and interest charges12. These penalties can be significant, adding to your tax liability and creating financial strain. For example, the penalty for failing to file on time is generally 5% of the unpaid taxes for each month or part of a month that a return is late, up to a maximum penalty of 25%13.
  • Audits: Errors on your return, especially those related to income reporting or deductions, can increase your chances of being audited by the IRS12. Audits can be time-consuming and stressful, requiring you to gather documentation and provide explanations for your tax filings.
  • Legal Action: In cases of intentional tax fraud or significant discrepancies, the IRS may pursue legal action, leading to criminal charges and potential imprisonment13. This is a serious consequence that can have long-term repercussions on your life and finances.

It's important to respond promptly to any IRS notices about errors on your return. Delaying a response can lead to further penalties, complications, and even legal action15.

Resources for Christian Taxpayers

As Christians, we have a responsibility to manage our finances with integrity and wisdom. Several resources are available to help Christian taxpayers navigate the complexities of tax filing:

  • Christian Financial Advisors: These advisors can provide guidance on financial planning and tax strategies from a biblical perspective16. They can help you integrate your faith with your financial decisions, ensuring you're not only fulfilling your tax obligations but also using your resources in a way that honors God. Organizations like the National Association of Christian Financial Consultants (NACFC) 17 and the Christian Financial Advisors Network 18 can help you find Christian financial advisors in your area.
  • Faith-Based Organizations: Some churches and faith-based organizations offer tax assistance programs or workshops to help their members with tax preparation19. These programs can provide valuable support and guidance, especially for those who may not be able to afford professional tax help.
  • IRS Taxpayer Assistance Centers: The IRS offers special Saturday hours at Taxpayer Assistance Centers across the country to provide in-person help to taxpayers20. This can be a helpful resource for those who need assistance with tax preparation or have questions about their tax situation.

Tax Implications of Common Errors

While we've discussed some of the consequences of tax filing errors, it's important to understand the specific tax implications of common mistakes, such as underreporting income or claiming ineligible deductions.

Underreporting Income 21

Underreporting income is a serious offense that can have significant tax implications. It's considered a form of tax evasion, which is a federal crime22. The IRS has sophisticated methods for detecting underreported income, including cross-referencing information from employers, banks, and other sources23.

The penalties for underreporting income can include:

  • Accuracy-related penalties: These penalties can be as high as 20% of the underpayment of tax13.
  • Civil fraud penalties: If the IRS determines that the underreporting was intentional, they can impose civil fraud penalties of up to 75% of the underpaid tax24.
  • Criminal charges: In severe cases, underreporting income can lead to criminal charges, including fines and imprisonment22.

It's important to remember that underreporting income is not a victimless crime. The tax revenue lost due to underreporting can impact funding for essential government programs, such as Social Security and Medicare21.

Claiming Ineligible Deductions 25

Claiming ineligible deductions is another common tax filing error that can have serious consequences. This includes deducting expenses that don't qualify for deductions under tax law or exaggerating the value of legitimate deductions25.

The penalties for claiming ineligible deductions can be similar to those for underreporting income, including accuracy-related penalties, civil fraud penalties, and even criminal charges25.

To avoid these penalties, it's crucial to ensure that you understand the eligibility criteria for each deduction you claim and that you have proper documentation to support your claims25.

Stories of Tax Filing Errors and Consequences

Here are a few real-life examples of how tax filing errors can have a significant impact:

  • The Case of the Missing Receipts: One taxpayer learned the hard way about the importance of keeping accurate records. When they were audited by the IRS, they couldn't provide sufficient documentation to support their claimed deductions, resulting in a hefty tax bill and penalties26.
  • The Woman Who Fought Her Tax Preparer: A retired teacher had her taxes prepared by a professional, but the preparer made significant errors on her return, leading to a large tax liability and a long battle to correct the mistakes27. This story highlights the importance of reviewing your tax return carefully, even if it's prepared by a professional.
  • The Baseball Fan and the Tax Surprise: A fan who caught a valuable home run ball faced a potential tax liability on the unexpected prize28. This illustrates how even seemingly unrelated events can have tax implications.

These stories serve as reminders that tax filing errors can happen to anyone and that it's crucial to be diligent and informed to avoid potential problems.

Tips to Avoid Tax Filing Errors

1. Gather All Necessary Documents 10

Before you start preparing your tax return, gather all the necessary documents, including:

  • W-2s: From your employer(s), reporting your wages and withholdings.
  • 1099s: For various types of income, such as interest, dividends, self-employment income, or retirement distributions.
  • 1098s: For mortgage interest, student loan interest, or tuition payments.
  • Receipts: For deductible expenses, such as charitable donations, medical expenses, or business expenses.
  • Records of digital asset transactions: If you've bought, sold, or exchanged cryptocurrencies or other digital assets.

Having all the required information readily available will help ensure accuracy and prevent delays29.

2. Use Tax Software or Seek Professional Help 10

Tax software can guide you through the filing process, perform calculations, and help identify potential deductions and credits29. Many tax software programs also offer error-checking features to help you avoid common mistakes. Filing electronically significantly reduces the error rate compared to paper filing9.

If you have a complex tax situation or are unsure about any aspect of filing, consider seeking assistance from a qualified tax professional29. An experienced tax professional can provide personalized advice, ensure accuracy, and help you maximize your tax benefits6.

3. Review Your Return Carefully 29

Before submitting your return, review all the information thoroughly to ensure accuracy. Double-check your entries, verify calculations, and ensure you haven't missed any important details29. Pay close attention to your filing status, income, deductions, and credits. If you're claiming the standard deduction and are over 65 or blind, make sure you're using the correct standard deduction amount30.

4. File Electronically 10

E-filing is generally faster, more accurate, and less prone to errors than paper filing29. It also allows for quicker processing of refunds29.

5. Keep Records 29

Maintain copies of your filed tax returns and supporting documents for future reference and in case of any discrepancies or audits29. This includes W-2s, 1099s, receipts, and any other relevant documentation.

Additional Tips for Accurate and Organized Tax Filing

  • Set a deadline for gathering tax information: This will help you stay on track and avoid last-minute rushes31.
  • Designate a specific place to keep tax documents: This will help you stay organized and prevent important documents from getting lost31.
  • Review your withholdings: If you consistently receive a large tax refund or owe a significant amount of tax, consider adjusting your withholdings with your employer32. This will help you avoid overpaying or underpaying taxes throughout the year.
  • Consider adjustments to income: When calculating your Adjusted Gross Income (AGI), remember to account for any adjustments, such as student loan interest or educator expenses33. These adjustments can reduce your AGI and potentially lower your tax liability.
  • Keep records of charitable contributions: If you plan to itemize deductions, keep detailed records of your charitable contributions, including receipts and any other relevant documentation8.

Correcting Tax Filing Errors 11

If you discover an error after filing your tax return, don't panic. You can correct it by filing an amended return using Form 1040-X11. This form allows you to make adjustments to your original return and claim any missed deductions or credits34. You can even electronically file Form 1040-X for added convenience34.

It's crucial to file an amended return as soon as possible to avoid further penalties and interest charges12. You can file an amended return within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later34. In some cases, correcting a mistake on your tax return might even result in a refund12.

The IRS may also automatically correct minor math errors on your return, so you don't always need to file an amended return for simple calculation mistakes3.

Conclusion

Self-filing taxes can be a manageable task for many Christians, but it requires diligence, organization, and a commitment to accuracy. By understanding the common pitfalls and following the tips outlined in this blog post, you can navigate the tax season with confidence and ensure you're fulfilling your obligations to both God and the government.

Remember, as Christian stewards, we are called to manage our finances with integrity and wisdom. This includes being honest and responsible in our tax filings. By avoiding errors and taking proactive steps to correct any mistakes, we demonstrate our commitment to biblical principles and our desire to be good stewards of the resources God has entrusted to us.

If you find yourself facing challenges or uncertainties in your tax journey, don't hesitate to seek guidance from Christian financial advisors or faith-based organizations. They can provide valuable support and help you make wise decisions that align with your values.

May God bless you with wisdom and discernment as you navigate your financial responsibilities. Please feel free to share your thoughts, experiences, or questions in the comments below!

Works cited

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Ralph V. Estep, Jr.

Christian Financial Consulting

Ralph V. Estep, Jr. is a highly accomplished professional with a diverse background in finance, accounting, technology, and entrepreneurship. As the principal at Saggio Management Group, Inc., he has demonstrated exceptional leadership and expertise in various roles throughout his career.

Ralph's educational journey began at St. Mark's High School in Newark, Delaware before attending the University of Nebraska where he was an esteemed member of the Cornhusker Marching Band and had the privilege of performing at the Florida Citrus Bowl in Orlando.

Continuing his pursuit of knowledge and excellence, Ralph earned a Bachelor of Science Degree in Accounting from the University of Delaware. He further expanded his academic achievements by obtaining a Master's in Business Administration from Wilmington University.

Throughout his professional journey, Ralph has been recognized for his outstanding accomplishments and commitment to excellence. He is a member of prestigious organizations such as the Golden Key National Honor Society and Beta Gamma Sigma International Business Honor Society.

With an extensive range of professional designations including Licensed Public Accountant (LPA), Accredited Business Accountant (ABA), Accredited Tax Advisor (ATA), Accredited Tax Preparer (ATP), and Internal Revenue Service Registered Tax Preparer (RTRP), Ralph possesses comprehensive expertise in tax preparation and financial management.

Beyond his impressive qualifications, Ralph has actively engaged with various community programs as bo… Read More

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