Taxes · Avoiding Mistakes

The Most Common Tax Mistakes People Make (And How to Never Make Them)

Updated ~17–21 min read

Most tax problems don’t come from complicated rules. They come from tiny mistakes people don’t realize they made until:

Their refund is delayed for months
An IRS letter shows up
They owe money they weren’t expecting
They miss deductions they could have claimed

This guide breaks down the most common tax mistakes — the ones everyday people make — and exactly how to avoid them. No jargon, no fear, just clarity.

These mistakes happen to smart, organized people. Understanding them puts you way ahead of the average taxpayer.

Meet Jasmine: Organized in life, overwhelmed at tax time

Jasmine is a nurse who handles life like a pro. She’s punctual, responsible, and always on top of her work. But tax season? That’s where things fell apart.

She had:

Two W-2s
A small side business selling handmade items
A move to another state mid-year

Everything seemed simple — until she filed her return and the IRS sent a notice saying income was missing. Jasmine panicked. But the truth was simple:

She forgot one small 1099 form from an online marketplace.

Not because she was careless. Because she didn’t know they were required to send one.

That’s how easy these mistakes are — and how easy they are to fix when you know what to look for.

Mistake #1: Forgetting income forms (W-2s, 1099s, and platform payouts)

If a company sends you money, there’s a good chance they also send the IRS a matching record.

If you forget to include it, your return still goes through — but later, the IRS computer compares:

The income you reported
The income they received from employers, banks, apps, platforms, etc.

If something is missing, you get a letter.

Where people miss income the most:

Side hustle platforms (Doordash, Etsy, Uber, Rover, Amazon, Instacart)
Gig apps that issue 1099-K or 1099-NEC
Bank interest or investment accounts you forgot about
Old job W-2s from January or February last year
Unemployment income

Tip: Create a digital “tax inbox” and drop every income document into it as you receive it.

Mistake #2: Entering numbers incorrectly

A typo is all it takes — one extra digit, one missing decimal — and your refund gets held while the IRS checks everything.

Common entry mistakes include:

Manually typing W-2 income instead of uploading the PDF
Switching two digits on your Social Security number
Mistyping a bank routing number for direct deposit
Entering the wrong employer EIN

Direct deposit mistakes can send your refund to the wrong account — and banks do not have to reverse it.

Always double-check numbers before you submit.

Mistake #3: Forgetting life changes that affect taxes

Your tax return is based on your life situation, not just your income. Major life events can change everything:

Marriage, separation, or divorce
Having or adopting a child
Supporting a relative
Moving to a new state
Starting or closing a business

When people forget to update these details, they miss credits, get delayed refunds, or file incorrectly without realizing it.

Mistake #4: Not claiming deductions and credits you qualify for

This is one of the biggest sources of lost money — people qualify for credits or deductions and simply never claim them.

Most missed credits include:

Child-related credits
Education credits
Earned income-based credits
Retirement savings incentives
Health-related deductions

Why most people miss them:

They assume they don’t qualify
They rush through tax software screens
They don’t track expenses or documents
They don’t know certain deductions exist

Most taxpayers leave hundreds — sometimes thousands — on the table simply by skipping questions too quickly.

Mistake #5: Not keeping receipts or records for deductions

For many expenses, the IRS doesn’t require receipts at the moment you file. But if they ever ask later, you must prove the deduction.

Most commonly lost deductions:

Charitable donations
Side-hustle expenses (mileage, supplies, software)
Business-related travel
Online subscriptions for creative or freelance work
Education or certification costs

A simple system that works:

One separate email folder named “TAX RECEIPTS”
One note in your phone for mileage
One cloud folder for PDFs
One debit card or credit card dedicated to business/side-hustle spending

That’s all you need.

Mistake #6: Filing too early

Many people rush to file the moment tax season opens — but that’s how they end up missing forms that arrive later.

Companies often send updates, corrections, or late forms such as:

Corrected 1099s
Updated investment statements
Year-end partnership documents

Filing before everything arrives can force you to amend your return — and that delays everything.

Mistake #7: Filing too late (without an extension)

Filing late without an extension triggers the harshest penalty in the tax system: the late-filing penalty.

Even if you owe, filing an extension eliminates that penalty. Always file the extension. It’s free.

Mistake #8: Mixing personal and business expenses

This is one of the top reasons side-hustlers get confused at tax time. When you mix everything:

You lose track of deductions
You underestimate your tax bill
You miss expenses you could have claimed

The easiest fix:

Use one separate account for side-hustle deposits and expenses. Even a free online banking space or a labeled bucket works.

Mistake #9: Misunderstanding paycheck withholding

Most people have no idea whether their employer is withholding too much or too little. They simply assume it’s correct.

But withholding is not automatic — it depends entirely on the information you gave your employer.

Signs your withholding is wrong:

Your refund is huge every year
You owe money every year
Your income changed but you never updated your W-4

A refund is not a bonus — it’s just your own money that the government held all year.

Mistake #10: Not reviewing your return before submitting

People click “submit” too fast. A two-minute review can catch:

Spelling errors
Wrong numbers
Missing forms
Wrong bank information

A quick review checklist:

Names spelled exactly as on Social Security cards
Correct birthdates
Right bank account and routing numbers
All income forms included
Nothing was skipped or left blank accidentally

Jasmine’s ending: Less fear, more control

After resolving her notice (which turned out to be simple), Jasmine made one decision:

She created a tiny tax system for herself.

She saved every income form the moment it arrived
She tracked her side-hustle income in a separate bank space
She scanned every receipt into one digital folder
She reviewed her paystub every few months

The next year, she filed with zero fear — because she already had all the information she needed.

The bottom line: Tax mistakes are preventable with small habits

Collect every form
Review numbers before submitting
Update withholding when life changes
Separate business and personal spending
Keep receipts in one place
Don’t file too early
File an extension if needed

With a few simple habits, you eliminate the most common tax mistakes — and your return becomes something you understand, not something you fear.