GROCO Warns of Common Tax Filing Mistakes
Top Ten Tax Filing Mistakes Self-Preparers Make
Alan L. Olsen, CPA, MBA (tax)
Greenstein Rogoff Olsen & Co. LLP
Tax return anxiety is on the rise as the federal tax filing date looms. The prospect
of filing an erroneous return increases as more rely on tax software to help prepare
their returns. For the week ending March 28, more than 10,000 electronic returns
were filed from home computers, an increase of at least 10% from the previous year.
Within the same week calls to the IRS increased dramatically as well- the IRS fielded
close to a million and a half calls per day. To allay some of the fears, the Internal
Revenue Service produces yearly advice on how to avoid common tax filing mistakes.
Reproduced below are the top ten common errors we have frequently seen among self
1. Choosing the wrong filing status. Taxpayers should confirm that the filing
status (i.e., single, married filing jointly, married filing separately, head of
household, qualifying widow(er) with dependent child) selected on the return is
correct. For example, taxpayers often incorrectly claim “head of household” filing
status without meeting the requirements for that status. In addition to delaying
the processing of the return and any refund, designating the wrong filing status
on a return also may affect a taxpayer’s eligibility for the Earned Income Credit.
The Instructions to the 2007 Form 1040 provide detailed information to assist taxpayers
in choosing their correct filing status.
2. Failing to include or using incorrect social security numbers. The names
and social security numbers for the taxpayer, taxpayer’s spouse, dependents, and
qualifying children for the Earned Income Credit or Child Tax Credit must be included
on the return exactly as they appear on the social security cards.
3. Failing to use the correct forms and schedules. Taxpayers should review
the instructions to all applicable forms and schedules to be sure they have correctly
used, and accurately completed, each form or schedule.
4. Failing to sign and date the return. Taxpayers must sign and date their
return under penalties of perjury. If the return is not signed, it will not be accepted
as filed by the Service. Both spouses must sign a joint return.
5. Claiming ineligible dependents. Taxpayers may claim a person as a dependent
only if that person meets the legal definition of a dependent. Taxpayers should
consult the Instructions to Form 1040 or 1040-A to confirm that a person qualifies
as a dependent. Each dependent must have a valid Social Security number (or other
Taxpayer Identification Number, as applicable), which must be included on the tax
return. The failure to include a dependent’s name and Social Security number, or
claiming an ineligible dependent, may result in an underpayment of tax and/or a
denial of the Earned Income Credit.
6. Failing to pay and report domestic payroll taxes. Taxpayers employing
household workers, such as a house cleaner, an in-home caregiver, or a nanny, must
report and pay payroll taxes for those individuals when the payments exceed certain
threshold amounts. Failure to pay and report payroll taxes may result in the assessment
of additional tax due, interest on the unpaid amounts, and penalties. The Instructions
to the Form 1040, Publication 926 (Household Employer’s Tax Guide), and Publication
15-A (Employer’s Supplemental Tax Guide) contain detailed information to assist
taxpayers in determining whether an individual providing household help is a household
employee for whom the taxpayer must report and pay payroll taxes.
7. Failing to report income because it was not included on a Form W-2, Form 1099
or other information return. Taxpayers must include on their tax returns
income reported on a third-party information reporting statement such as a Form
W-2 or Form 1099, or other similar statement. But even if income was not reported
on a third-party reporting statement, taxpayers must still report all income. Failure
to report all income may result in the assessment of additional tax due, interest
on the unpaid amounts, and penalties.
8. Treating employees as independent contractors. Employers may not treat
an employee as an “independent contractor” to avoid paying and reporting payroll
taxes. Employers who improperly treat an employee as an independent contractor may
be liable for additional tax due, interest on the unpaid amounts, and penalties.
Publication 15-A (Employer’s Supplemental Tax Guide) contains detailed information
to assist taxpayers in determining whether an individual is an employee or an independent
9. Failing to file a return when due a refund. Taxpayers must file a return
to claim a refund of withheld taxes when a refund is due. Taxpayers will forfeit
refunds of withheld tax if a return requesting a refund is not filed within three
years of the due date.
10. Failing to check liability for the alternative minimum tax. Taxpayers
should determine whether the alternative minimum tax, or AMT, applies. If a taxpayer
is liable for AMT but does not include it on the return, the Service will determine
the taxpayer’s liability and may reduce or deny a requested refund or assess any
additional tax due, interest on the unpaid amounts, and penalties.
i(2007, 04 09). Common Mistakes on Tax Returns. Retrieved March 25, 2008, from Internal
Revenue Bulletin - April 9, 2007 - Notice 2007-35 Web site: http://www.irs.gov/irb/2007-15_IRB/ar09.html