Common Mistakes in Last-Minute Tax Returns

If you’re just now getting around to filing your tax return, you’re not alone. In normal years, about half of the nation’s taxpayers file in the final month of tax season. And more people than usual are procrastinating this year, the IRS has reported.

Reasons for the later filings include confusion, uncertainty about the future, the possibility of a smaller tax refund or no refund at all, or simple aversion, say IRS and other tax experts.

Whatever the reasons, if you’re a last-minute filer, be careful. The IRS says you are in the most error-prone group of filers. And a number of common errors can cost you money or delay your refund.

Here’s a dozen of these common mistakes and what happens if you make them:

* Sent the return, but forgot the check. Forgetting to send payment for the tax due can trigger hefty penalties, says Mike van den Akker, partner in charge of personal financial planning at the accounting firm of Price Waterhouse in San Francisco. You could face a penalty equal to 0.5% of the tax due for every month you’re late.

* Wrong service center. If you send your return to the wrong center, they’ll either send it back or try to forward it. Either way, it’s likely to get there late, which could trigger late filing penalties or delay your refund.

* No signature. If you’ve got a balance due and you send a signed check, the IRS usually will just send you a note and ask for your signature, says Nancy McCurley, an IRS spokeswoman. But if you’re due a refund, they’ll return the whole form for your signature. Obviously, that delays your refund.

* Insufficient postage. Bleary-eyed filers who wait until a few minutes before midnight to post their returns may make stupid errors, like forgetting the stamps. If your return is returned for insufficient postage, you could be subject to late filing fees of up to 5% a month.

* Math errors. If you’ve clearly just added or subtracted incorrectly, the IRS will fix it for you. If it’s not clearly a math error, you get a discrepancy notice. If you don’t respond, you get audited.

* Mismatches. The IRS has an extensive computer matching program, which picks up most wage, interest, dividend and capital gain income. If you report numbers that differ from what your bank, brokerage or employer has already reported, you get a discrepancy notice. You may have just transposed a number. But if you don’t have a good and prompt explanation, you get an audit.

* Failure to report state tax refunds. People commonly forget to report these refunds, says Van den Akker. But they’re income reported to the IRS through computer match.

* Forgetting a schedule. The IRS says a number of people claiming the Earned Income Credit this year have forgotten to include the schedule. EIC money won’t be refunded if you don’t include the Schedule EIC.

* Missing Social Security numbers. The IRS can disallow personal exemptions for children over the age of 1 if you fail to include their Social Security numbers, Van den Akker says.

* Misreading the tax tables. This is more annoying than problematic. You think your tax is $450 and it’s really $462. You just read across the wrong column. Usually, the IRS will correct the error and bill you or reduce your refund for the $12 difference.

* Failure to report a retirement distribution or capital transaction. If you get a pension distribution and roll the money into an IRA, or if you sell a home and roll the gain into another residence, there’s no tax due. But you’ve still got to report the deal on your tax return. Again, it’s because of the IRS match. They know it happened. Keeping them in the dark about what you did with the cash is a great way to single yourself out for greater scrutiny.

* Failure to document non-cash charitable contributions. If you give property worth more than $500 to charity, you need to fill out a form that says what it was, who you gave it to and how you determined the value. If you claim the deduction and don’t send the form, the IRS will send the form to you. And a real live auditor will take a look at it when you send it back.