Be Smart, Not Stupid when e-Filing Taxes

We aim to alleviate some of the stress that comes with filing taxes! There are several habits, good and bad, that taxpayers may find themselves getting into. This page outlines some of the smart habits to develop when it comes to filing as well as many less-than-smart things to do.

Be in the
Smart
Tax Zone

Why is that so? The IRS/state late tax filing penalties are generally higher than the late tax payments. Filing your taxes can be a separate process than paying your taxes, meaning you can file by the deadline even if you are not ready to pay all your due taxes. This will result in tax penalties: estimate potential tax penalties.

Tax Refund Deadline: If you do not file your tax return within three years of its original Tax Day deadline, then your tax refund will expire! As in gone, and bye-bye; don't join this statistic of loss and neglect.

Short, high level tax deadline video

Many people dread (and love) Tax Day. Whether they will owe taxes or expect a tax refund, stress levels usually rise during this time of year. Tax stress can affect everyday activities, such as driving. In fact, fatal car crashes increase 6 percent on Tax Day, according to 30 years of car crash statistics from the National Highway Traffic Safety Administration (NHTSA).

Start and eFileIT Now

Unfortunately, when people are stressed about taxes, they may end up making mistakes on their tax returns. Take a deep breath and consider the following things to avoid when doing your taxes; scroll to find stupid and smart things to do when preparing and filing your tax return.

File your return on eFile.com and we will walk you through simple questions to help you avoid any mistakes when filing your taxes.

Stupid Things to Avoid When Doing Your Taxes

Let's look at 11 simple things not to do when it comes to taxes.

• Not filing on time: Always file on time, whether it be a tax return or tax extension by the April Tax Day deadline. If you miss the deadline, you will have until the IRS e-file deadline in October to file your return online. If you owe taxes, pay as little or as much as you can, even if you do not have the money to pay the full amount of taxes you owe. Why? Most taxpayers do not know that the late IRS filing penalty is higher than the penalties and interest for not paying your taxes on time. Of course, the late payment penalties could increase if the amount of taxes due is very large and are paid far beyond the due date.

Use the PENALTYucator and estimate potential penalties.

• Not filing at all: The IRS considers not paying on time and not filing as two separate issues, thus a penalty is involved for each. Generally, the highest IRS penalty is the failure to file on time penalty. Even if you file a return and you owe taxes but cannot pay anything, it is still better to at least file a return than to not file at all. You should pay as much as you can when you file your return because the IRS assesses penalties and interest on the amount not paid. Even if you can only pay a little, it can make a big difference. When you file your tax return, you have several options to pay taxes you owe. You can make monthly payments through an IRS installment agreement, apply for an Offer in Compromise, or temporarily delay paying. Whichever is best for you, contact the IRS right away to let them know you cannot pay and to make payment arrangements with them.
• Reporting false tax information: It is a waste of time to include income that does not exist or report tax credits that you do not qualify to claim. This is especially important due to recent videos on social media about falsifying your return to get a big refund - there is no such thing as free government money through a tax refund, a tax refund is your money! Not only is it wrong to lie on your tax return, but it is also a crime. Even if you do not get charged for tax fraud, the IRS tracks patterns of tax behaviors (avoiding paying, claiming deductions that you do not qualify for), and you will be flagged eventually. Not only would you face a hefty tax bill and eventually pay what you owe plus interest and penalties, it may slow down the processing of future refunds and increase your audit risk.
• Not saving tax records or receipts: To deduce certain expenses, you will need to accurately enter the amounts of your deductible expenses in order to calculate the amount you can deduct. Examples include business expenses, mortgage interest payments, charitable contributions, and more - always hang on to all your receipts, statements, and other documents that show proof of these purchases. You do not need to include them when you e-file, but you will want to keep them for your records.
• Claiming a dependent without an SSN or one you are not qualified to claim: The IRS will disallow your dependent and any related dependent deductions or credits, re-compute your tax, and either send you a lower-than expected refund or a tax bill if you wrongly claim a dependent. If you recently had a baby, make sure the child has a Social Security Number prior to filing. See details on wrongly claimed dependents.
• Entering incorrect information: SSN, date of birth, or other personal information entered incorrectly may result in an IRS rejection and/or delay the time you receive your tax refund, especially if you enter incorrect bank direct deposit information or mailing address. If you are not sure about the information you entered, ask a person you trust to review your return.
• Waiting until the last minute to file: This might increase your chances of making mistakes on your return. Additionally, if you make a mistake that results in an IRS rejection, you may miss the deadline. Make sure you have all your documents gathered before you file; better yet, collect and organize your documents throughout the year to save time on tax planning. Prepare to prepare with eFile.com by visiting our comprehensive checklist of tax preparation resources and guides. Also, if you attempt to electronically file your return and wait until the last minute before 12:00 pm, the IRS' systems might get bogged down as many other taxpayers waited as well and your return might not get filed before midnight on Tax Day.
• Not getting your refund the fastest way: e-File your tax return - eFileIT - and request direct deposit into a bank account. According to the IRS, this is the fastest way to get your refund and you can generally expect your tax refund to be deposited in your account within 21 days. The other option is to wait approximately four to six weeks to have your refund check mailed to you. Learn more about the statistics of e-filing or use the DATEucator tool to see exactly how quickly your refund could be deposited.
• Immediately spending a tax refund: Spending your refund may not be such a good idea, no matter how tempting. If you have large credit card debt, inadequate savings or limited retirement funds, a better use of your refund may be to pay down tax debt, open a savings account or establish an IRA. See other money saving tips.
• Using tax refund products: These are advertised heavily during tax season. However, the advertising does not tell you about the fees and steep interest rates associated with a short-term refund anticipation loan. Also, don't forget that it is a loan; if the IRS turns down any deductions or credits on your return and you don't get the refund you were expecting, you will still be responsible for paying back the amount of the loan.
• Ignoring a letter from the IRS: Bottom line, do not ignore mail from the IRS. If you owe taxes, the IRS will collect them. Those who do not communicate with the IRS about inability to pay can expect a "Notice of Federal Tax Lien" to be filed against their property. A lien is a public record that is attached to your property including your house, car, and any future property you might obtain, telling all that you owe creditors money. If there is a lien on your property, you generally cannot sell it or refinance it until you have paid the debt and the title is cleared of the lien. A levy, which is a legal seizure of property to satisfy a tax debt, is another legal means the IRS can use to collect taxes. This means the IRS can seize your home, car, or boat, and sell it to satisfy your tax debt or it can place a levy on your wages. These levies and liens often stay on your records long after the issue has been resolved or until the IRS gets around to removing it, so IRS liens and levies are something to be avoided at all costs.

Smart Things to Do When Doing Taxes

Now that we know what not to do when preparing your taxes, let's review some things to keep in mind to get your taxes in order.

• Estimate early to get an idea: Use this free tax calculator to better understand your taxes. With an estimated return, you can be better prepared to file your taxes and avoid any surprises when filing taxes. We also have several other tax calculators for specific situations.
• Gather all your forms ahead of time: Since the IRS has already received a copy of most of your tax forms (1099, W-2, etc.) this means that they expect the same figures on your return. When entering your tax forms into your eFile account, enter all the data as it appears on your forms. You should have all your forms by the end of January so you can begin preparing your return once you have them, but don't file until you are certain that you have reported everything.
• Enter accurate and honest information: Use your tax forms to enter only honest, accurate information; the IRS will crack down on exaggerated, dishonest, or inaccurate information entered, especially if it is to generate a large refund. Steer clear of social media videos which encourage you to falsify information on your taxes to get a large refund - the IRS will catch this. See other tax scams to avoid.
• File on time: File a tax return or extension on time, regardless if you don't have the money to pay your taxes. We cannot stress this enough. Filing a tax return or tax extension on or before Tax Day will eliminate any failure to file penalties which are nine times more expensive than any other IRS penalties for not paying the tax you owe (4.5% vs. 0.5%). Consider IRS installment agreements and other tax payment options if you cannot pay all the tax you owe on Tax Day. Though an IRS tax extension or state extensions gives you extra time to prepare and file your tax return, do not think of the extension as an excuse to procrastinate on your taxes for 6 more months. Take advantage of the additional time by figuring out how you are going to file your return and pay any taxes owed if necessary. Be aware that an extension does not give you more time to pay the tax you owe penalty-free. Use the extra 6 months wisely to prepare and file your tax return on time if you filed an extension by Tax Day. It is faster and more secure to e-file a tax return or extension than filing on paper. Generally, you will receive a notice within 24 to 48 hours after e-filing a return or extension if it is accepted (or rejected, which is easy to fix online). In addition, if you are expecting a refund, you can expect it in as little as 7 days, according to the IRS.
• Get your refund the fastest way: e-File your tax return - eFileIT - and request direct deposit into a bank account. According to the IRS, this is the fastest way to get your refund and you can expect your tax refund to be deposited in your bank account within 21 days. The other option is to wait approximately four to six weeks to have your refund check mailed to you. Learn more about the statistics of e-filing our use the DATEucator tool to see exactly how quickly your refund could be deposited.
• If you owe taxes, review tax payment options: review the several options to pay taxes you owe before you e-file so that you know the best way for you to pay your taxes.
• If you are preparing and e-filing a federal tax return on eFile.com: you can pay your taxes owed during the e-filing process via direct bank transfer to the U.S. Treasury by entering your bank account information. Once you submit your tax payment, your bank statement will list "U.S. Treasury" and a PIN or access code for referencing the transaction.
• Pay your due taxes online: We highly encourage paying online, with your return or after filing, instead of mailing in payment. Submit an online tax payment using a credit or debit card after the e-filing process. The IRS accepts direct bank payments or debit payments via IRS Direct Pay (recommended), but they also accept MasterCard, American Express, Visa, Discover, PayPal, and more through authorized payment processors (less recommended). Be aware that the processing companies may charge a "convenience fee" based on payment amount (generally 1.90%-2.35% of the total for credit card payments and 1.90%-3.95% for debit card payments). The credit card convenience and interest fees may or may not be greater than the IRS interest, so compare your options before choosing the option that benefits you the most.
  • Although this is a better approach than not paying your taxes at all, you should investigate the best way to borrow the money. Compare the interest rate of your credit card with that of a personal loan from your bank or credit union. The idea is to incur the least amount of money in interest. Try to pay off the loan as soon as possible and do what you can to avoid the same situation next year. To pay your taxes on time, you may need to adjust your withholding on your W-4 with your employer or put aside money each pay period in a savings account.
• Save a copy of your return: Once a tax return has been e-filed and is accepted by the IRS, you should download and save a copy of your return. Be sure to save other tax documentation, such as W-2s or 1099s, for your records. That way, if the IRS sends you a notice about your tax return, such as missing or confusing information about your return, you can provide them with any documentation they request from you.

More Tax Tips

• Tax return planning checklist
• Free eFile.com tax return planning tools
• Tax payment options
• How to adjust your paycheck withholding on a W-4 Form
• How to get a copy of your tax return.

TurboTax^® is a registered trademark of Intuit, Inc.
H&R Block^® is a registered trademark of HRB Innovations, Inc.