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3 Tax-Filing Mistakes That Could Cost You Money – The Motley Fool

Image source: Getty Images

Do your best to avoid these at all costs.


Image source: Getty Images

Do your best to avoid these at all costs.

Key points

  • Avoiding mistakes on your tax return could result in a higher refund or lower IRS bill.
  • If you’re not sure whether you’re doing your taxes correctly, it could pay to hire a professional for help.
  • Not claiming the right credits or amounts, taking the standard deduction, and not claiming enough deductions are mistakes you want to avoid when filing your taxes.

Your goal as a taxpayer should be to fork over as little money to the IRS as possible — legally, of course. But if you make these mistakes on your tax return, you could end up shorting yourself on a tax refund or writing out a larger check to the IRS than necessary.

1. Failing to claim the right credits — or claiming the wrong amounts

A tax credit is a dollar-for-dollar reduction of your tax liability. Simply put, if you owe the IRS $1,000 but qualify for a $1,000 tax credit, that $1,000 tax liability is wiped out.

There are a host of tax credits you may be eligible for based on factors like your income and the number of children you have in your household. But if you miss out on credits you’re entitled to, or claim the wrong credit amounts, you could end up losing money needlessly.

How can you avoid that fate? For one thing, file your taxes electronically rather than on paper. The great thing about using tax software is that it will calculate the value of different credits for you based on your income and other factors. Hiring a tax professional could also make sense if you have a lot of different credits to claim and you want to make sure you’re getting everything right.

2. Taking the standard deduction rather than itemizing

You get a choice when filing your taxes. You can take the standard deduction, which the IRS establishes each year, or you can itemize individual deductions on your return.

The standard deduction you’re entitled to hinges on your tax-filing status. This is what it looks like for 2021:

  • $12,550 for single filers or married people filing separately
  • $18,800 for head of household
  • $25,100 for married couples filing jointly

The standard deduction got a huge boost following the 2017 tax code overhaul, and …….


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