You are making a blunder on your tax return might result in a hefty financial loss. You might lose out on a larger refund than you reported, owe more taxes, plus interest and penalties, or be the subject of an IRS audit. Avoiding mistakes on your return is the best defense against consequences like this.

Tax Returns: How Long Do I Need to Keep Them?

Tax returns and accompanying records should be kept for at least three years, and in some instances up to seven years, by the Internal Revenue Service. You should retain your paperwork for seven years if you need to submit an insurance claim for a disadvantage due to worthless investments or bad debt. If you fail to declare money that is greater than 25% of your income as reported on your taxable income but is not reported, you should retain records for at least six years.

Mistakes in Tax Filing: What Are the Most Common?

Misspellings, incorrect Social Security numbers, a mistaken filing status, and unsigned forms are some of the most typical blunders. "An unsigned tax return is not valid...period," says the IRS.

Itemizing or Taking the Standard Deduction?

You can accept the standard deduction or itemize your deductions when you file your tax return. If your standard deduction is more than the value of the items you may itemize, it makes financial sense to do so.

2021 and 2022 SDA Amounts?

For 2021, the standard deduction is $12,550 for single and married taxpayers who file separately, $18,800 for heads of household, and $25,100 for married taxpayers who file jointly and surviving spouses who claim the deduction jointly. Single and married taxpayers filing will have to pay $12,950 in 2022; heads of household will pay $19,400, and married couples filing would have to pay $25,900.

Common Errors in Tax Return Preparation

There are over 4 million words of tax statutes and IRS rules in the United States. Despite the complexity of the regulations, the mistakes taxpayers make on their returns tend to be very straightforward.

1. Basics are wrong

Verify the spelling of your name and the names of any dependents, as well as the accuracy of their Social Security numbers. Select the appropriate filing status based on your scenario. Still, suppose you fulfill the conditions for being a head of household or eligible widow(er) with a dependent child.

You may qualify for more favorable tax rates and other tax privileges in that case. In some cases, filing separately rather than jointly might result in tax savings for married couples. You can use the IRS.gov Interactive Tax Assistant to determine the suitable filing status, especially if you are eligible for more than one.

2. You Don't Input Data As Reported.

If you have income from wages, dividends, bank interest, or any other source, accurately put it on your tax return. The IRS has received these forms and is comparing the data to see whether it matches what's on file. Dispute the information you've received by contacting the company that paid you and requesting a revised payment form.

3. You don't use the right line.

It would help if you double-checked that all of your entries appear precisely where you want them to appear on your tax forms. In the case of a tax-free IRA rollover, don't place it on the distribution line reserved for taxable accounts. You may avoid this problem using a tax program but always double-check your final return before submitting it.

4. Automatic standard deduction.

You may lose money if you take the standard deduction instead of itemizing your deductions, even if it takes more time and effort. Make sure you choose the one that provides you with the most tax break. Because of the Tax Cuts and Jobs Act's roughly twofold increase in the standard deduction, itemizing your deductions is no longer cost-effective. 2 Even so, it's always a good idea to run the numbers in both directions.

5. You don't accept write-offs.

The fear of an audit red flag may cause some people to avoid a particular deduction. For example, there is still the misconception that taking a home office deduction might result in a tax audit. This is most likely not the case because many people now work from home. The IRS has devised a simple deduction alternative to writing off actual expenditures. It would help if you took a deduction as long as you fulfilled the tax law's conditions.

6. You Neglected Your State Health Obligation.

Tax-wise, in 2019 you won't have to pay a penalty charge under the Affordable Care Act's mandate for each month you (or your family, if applicable) don't have qualified health insurance. However, individual health insurance is required in certain states, so check to see whether this is the case in yours.