When filing taxes, mistakes can occur, as the process can be complicated. Unfortunately, incorrect information may negatively impact you.
The Internal Revenue Service (IRS) may require you to pay a penalty, or you may face a tax evasion charge if the IRS can prove it was a willful attempt to avoid paying taxes, rather than an honest mistake.
Knowing the mistakes people make on tax returns can help you avoid them. Here are two of them:
Incorrect personal information
Misspelling a name or including an inaccurate Social Security number (SSN) is mostly considered an error by the IRS. Typically, it will reject the return, and as a result, the taxpayer will be required to correct the mistake and re-file. However, filing a return using someone else’s name or SSN could be viewed as concealing income.
If you are legally authorized to file taxes on behalf of someone else, for instance, if you are their Power of Attorney (POA), always double-check every detail, especially when simultaneously filing your own return. Avoid entering your information on the other person’s return and vice versa, or mixing up financial information.
Failing to report income
If you have multiple sources of income, you should confirm that you have reported all of them on your tax return before submitting. If you have jobs outside traditional employment, such as freelance work, or accept cash payment for goods or services rendered, it can be easier to forget reporting such income. You should not overlook income from some side jobs. This can be a serious problem if the IRS believes you deliberately underreported your income.
Facing a tax evasion charge can result in severe criminal and civil penalties. Proving a lack of intent is critical in protecting yourself.