Little Missteps Hurt Last-Minute Filers

(MoneyWatch)  Filing your tax return in the hours before the deadline? Be careful. Last-minute filers are an error-prone group and some little mess-ups can cost you money or significantly delay your refund.


The IRS keeps track of some mistakes that are easy to spot -- things like juxtaposed Social Security numbers and tax returns that come in unsigned. But that doesn't mean they'll pat you on the shoulder and tell you not to worry about it.

An unsigned tax return isn't officially filed. A joint return needs to be signed by both spouses. If you slap your return together bleary-eyed on Wednesday and forget to put your John Hancock on the signature line, the IRS could charge a late filing penalty when they kick it back to you. (They usually won't -- they're not completely heartless. But they can.)

If you fail to properly transcribe a dependent's Social Security number, the agency can disallow any deduction or credit related to that taxpayer, such as the $3,500 "personal exemption" deduction, not to mention the $1,000 child tax credit, the earned income tax credit and the dependent care credit. Before you go apoplectic looking at the tax bill that resulted from your careless error, realize this error is correctable. But if you don't do it right the first time, you sentence yourself to refiling and waiting (at the end of the very long line of last minute filers) for the refund you could have gotten weeks earlier.

Other costly mess-ups:

• Seniors get an extra standard deduction for being over the age of 65 or disabled. Based on early returns, some 8,000 seniors had already failed to take it.
• The new "additional standard deduction" for those paying property taxes is also easy to miss. To claim it, you need to know it exists -- the tax form doesn't exactly telegraph the option -- and write it in. On the 1040, you'd do this by checking line 39c, then adding the right amount -- that's the lesser of your property taxes or $500 for singles/$1,000 for married couples -- to your standard deduction.
• Individuals pay a lower rate on capital gains and qualified dividends than they do on ordinary income, but they've got to fill out a form to figure the right amount. About 11,000 people failed to do that on early returns.
• Failing to report income is also common in years when the economy is tight and people are looking for ways to cut corners, said Roni Deutch, author of The Tax Lady's Guide to Beating the IRS. But you should know that if you got an income statement, the IRS did too. Their computers will match those and, if you under reported income, they'll send you out a bill for the tax--and penalties--in about a year.

But the biggest mistake is not filing at all, said Victor Omelczenko, an IRS spokesman in Los Angeles. Sometimes, when people find that they owe money, but don't have the means to pay, they panic and fail to file. But, that's far more expensive than filing without sending a check.

If you owed $1,000 and didn't file at all your tax bill would have grown to $1,345 by the next year, he said. The biggest piece of that 35% increase is a $225 failure to file penalty. If you'd just failed to pay, the penalties and interest would have amounted to $160--and a portion of that might have been waived. The government has a new program aimed at providing some leeway for those who simply can't afford to pay in today's difficult economy. It doesn't completely let people off the hook, but it provides time at a relatively low cost (which varies based on circumstance and income) for those who really need it, he said.