Taxes 2022: Common Mistakes You Want to Avoid as the Tax Filing Deadline Approaches
If filing income taxes were simple, then millions of Americans wouldn’t have to buy tax software or hire professional tax preparers to help out. Because the process is not so simple, it’s easy to make mistakes.
With the 2022 filing deadline fast approaching — most Americans must have their returns filed by April 18 — it’s important to avoid mistakes even if you feel panicked to get your return filed on time. Filing an incorrect return means you’ll have to file an amended one later, and maybe pay a penalty along with it.
Carelessness leads to one of the most common mistakes: putting in wrong information, whether it’s your Social Security number, bank account number, or even your name and birth date (yes, this happens). Always double-check your returns to make sure all your personal information is correct.
Along those same lines, keep an eye out for math errors. Pretend that you are back in school, and double-check your work to make sure your addition, subtraction, multiplication, etc., arrive at the correct amounts.
Another common mistake is not including all of your income. This is especially relevant in the age of the side hustle, when many Americans earn extra money in their spare time to supplement their main source of income.
“A lot of people aren’t aware that it’s not just W2 income, it’s self-employment which includes your side gigs. Unemployment [benefits are] also taxable as well,” Camille Fields, a tax pro with Jackson Hewitt in Ohio, told ABC6/FOX28.
Some taxpayers also forget to include interest, dividend and investment income — all of which need to be included in your total income. Make sure you have all your income sources accounted for before signing and filing your return.
One mistake that has become a lot more common during the COVID-19 pandemic is that many taxpayers are using expired ID numbers to file their taxes.
“You need an ID that is not expired, we see that a lot especially because of the pandemic, they forget that they did not renew their license,” Fields said.
Charitable contributions are also fertile territory for mistakes. One common mistake occurs when you receive a benefit in exchange for your donation, such as tickets to an event. In this case, you need to deduct the fair market value of the tickets from your charitable contribution, according to Bloomberg Tax.
Not surprisingly, a mistake that occurs with increasing frequency these days is failing to report cryptocurrency transactions. As Bloomberg Tax noted, crypto is treated as property for federal income tax purposes. Any capital gain or loss on virtual currency transactions must be recognized on your return.
Keep an eye out for this question on the first page of Form 1040: “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?” You will need to check the appropriate box and report the related amounts, if applicable.
More From GOBankingRates