Tax returns are something you want to get right the first time. A math error could cause processing delays or worse, like a refund adjustment or a penalty.
And while the use of tax software these days reduces the number of errors we make, it certainly hasn’t eliminated them.
The IRS keeps data — most recently from the 2020 tax year — on the most common types of math errors it sees on tax returns.
Following are some common tax mistakes to avoid.
1. Tax calculation/other taxes
The number of 2020 tax returns with this type of math error: 407,757
The IRS broadly defines this category to include “all errors associated with the calculation and assessment of income taxes, as well as other taxes” including self-employment tax, alternative minimum tax and household employment tax. Taken together, these sort of mistakes accounted for 3.2% of what we got wrong on 2020 taxes.
2. Child tax credit
The number of 2020 tax returns with this type of math error: 244,148
Many lower-income and middle-class parents claim the child tax credit, first created in 1997, although it’s just one of many tax breaks available for parents. For 2020, 1.9% of the math errors found were related to the child tax credit.
3. Adjusted gross income
The number of 2020 tax returns with this type of math error: 283,346
Adjusted gross income, or AGI, is crucial in determining how much income you’re taxed on each year. It makes sense that adjustments to that income, and understanding what expenses are deductible, would account for a significant number of taxpayer errors — 2.2% of them.
4. Education credits
The number of 2020 tax returns with this type of math error: 90,904
Tax credits are designed to make the cost of college less cumbersome for students of all ages. This category, which includes the Lifetime Learning Credit and the American Opportunity Tax Credit, represents about 0.7% of math mistakes.
5. Earned income tax credit
The number of 2020 tax returns with this type of math error: 155,351
The earned income tax credit is one of the most valuable tax credits available and available to low to moderate-income workers between ages 25 and 64. For the 2020 tax year, it accounted for 1.2% of math mistakes.
6. Standard/itemized deduction
The number of 2020 tax returns with this type of math error: 119,115
The Tax Cuts and Jobs Act of 2017 simplified the choice of whether to itemize tax deductions by making the standard deduction much higher. But not everyone has given up on itemizing — and that’s probably where most of the 0.9% of all math errors in this category come from.
7. First-time homebuyer credit repayment
The number of 2020 tax returns with this type of math error: 61,132
A half-percent of all math errors the IRS sees relate to the first-time homebuyer tax credit, which has a number of potentially confusing rules for when and how it must be repaid.