Do I Need to Review My Tax Return for Accuracy?

Filing a tax return is a key financial responsibility, but mistakes can cause delays, missed refunds, or IRS penalties. Many assume their job is done once they submit their return, but reviewing it for accuracy is just as crucial.

A careful review ensures all income is reported correctly, deductions and credits are properly claimed, and personal details match official records. Overlooking these details can lead to costly corrections later.

Confirming Income Sources

All income must be accurately reported to prevent discrepancies that could trigger IRS scrutiny. Employers, financial institutions, and other entities submit income reports to the IRS, so any mismatch could result in an audit or a notice of underreported income.

Wages and salaries appear on a W-2 form, which employers must provide by January 31. Independent contractors and freelancers receive 1099-NEC forms if they earned at least $600 from a single client, but self-employment income must still be reported even if no 1099 form is issued. Investment earnings, such as dividends and capital gains, are detailed on 1099-DIV and 1099-B forms, while interest income is listed on 1099-INT.

Rental income, including payments from platforms like Airbnb or Vrbo, must also be reported. These platforms issue 1099-K forms if transactions exceed $20,000 and 200 transactions, though some states have lower thresholds.

Social Security benefits, unemployment compensation, and retirement distributions require verification as well. Form SSA-1099 reports Social Security income, while 1099-G covers unemployment benefits. Withdrawals from traditional IRAs and 401(k) plans are reported on 1099-R, and failing to include them can result in unexpected tax liabilities.

Reviewing Deductions

Deductions lower taxable income, but errors can lead to missed savings or IRS scrutiny. Many taxpayers overlook eligible deductions or miscalculate amounts, impacting their final tax bill. Ensuring accuracy requires understanding which expenses qualify and maintaining proper documentation.

For those who itemize, mortgage interest, state and local taxes, and medical expenses are common deductions. Mortgage interest is reported on Form 1098, but only interest on loans up to $750,000 is deductible for mortgages taken after December 15, 2017. State and local tax deductions are capped at $10,000, covering property, income, and sales taxes. Medical expenses must exceed 7.5% of adjusted gross income to be deductible, and only unreimbursed costs qualify.

Self-employed individuals can deduct home office expenses and business-related mileage. The home office deduction applies to spaces used exclusively for business, calculated using either the simplified method at $5 per square foot (up to 300 square feet) or actual expenses like rent and utilities. Business mileage is deductible at 67 cents per mile for 2024, but a detailed log is required to substantiate the claim.

Verifying Credits

Tax credits directly reduce the amount owed to the IRS, making them more valuable than deductions. Errors in claiming credits can lead to missed savings or delays in processing a return. Some credits are refundable, meaning they can generate a refund even if no tax is owed, while others only reduce the tax bill to zero.

Education-related tax credits, such as the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), provide savings for tuition and fees. The AOTC offers up to $2,500 per eligible student for the first four years of higher education, with 40% of the credit refundable. The LLC, while nonrefundable, allows a credit of up to $2,000 per tax return for tuition and required course materials, with no limit on the number of years it can be claimed. Taxpayers must have Form 1098-T from their educational institution to support these claims.

Families with dependents should verify eligibility for the Child Tax Credit (CTC) and the Credit for Other Dependents. The CTC provides up to $2,000 per qualifying child under 17, with $1,600 refundable for 2024. Dependents who do not qualify for the CTC may still allow for the Credit for Other Dependents, which offers up to $500 per dependent. Ensuring dependents meet residency, relationship, and support requirements is necessary to avoid IRS issues.

Energy-efficient home improvements and electric vehicle purchases can also yield tax savings. The Residential Clean Energy Credit provides up to 30% of the cost of qualifying solar panels, wind turbines, and battery storage, with no annual limit. The Clean Vehicle Credit, which offers up to $7,500 for new electric vehicles, requires the car to meet final assembly and battery component requirements. Taxpayers should verify their vehicle’s eligibility through the IRS website before claiming the credit.

Checking Filing Status

Selecting the correct filing status affects tax brackets, standard deduction amounts, and eligibility for certain tax benefits. While many taxpayers default to the same status each year, changes in personal circumstances—such as marriage, divorce, or the birth of a child—can shift which status is most beneficial. The IRS recognizes five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Surviving Spouse.

Head of Household provides a larger standard deduction ($21,900 in 2024) and more favorable tax brackets than Single status, but it requires the taxpayer to pay more than half the cost of maintaining a home for a qualifying dependent. Misclassifying as Single instead of Head of Household could result in paying more in taxes than necessary, while incorrectly claiming Head of Household could trigger an IRS audit. Similarly, Married Filing Separately is often less beneficial than filing jointly due to the loss of certain deductions and credits, yet it may be useful in cases where one spouse has significant medical expenses or student loan payments tied to income-driven repayment plans.

Adjusting Returns if Errors Are Found

Even after careful review, mistakes can occur, requiring a tax return to be corrected. The IRS allows taxpayers to amend a return using Form 1040-X, which can be filed electronically for returns originally submitted online or by mail for paper filings. Identifying errors early can prevent penalties and interest, particularly if the mistake results in underreported income or incorrect tax liability.

If an error involves misreported income, deductions, or credits, an amended return should be submitted promptly. For example, if a taxpayer accidentally omitted a 1099-INT reporting $500 in interest income, failing to correct it could lead to an IRS notice and additional tax owed. Similarly, if a taxpayer mistakenly claimed a deduction they were not eligible for, adjusting the return proactively can prevent complications. The IRS typically allows three years from the original filing deadline to amend a return and claim a refund, but if taxes are owed, interest starts accruing from the original due date.

If an error is discovered after receiving an IRS notice, responding promptly is necessary. The IRS may correct minor math errors or missing forms without requiring an amended return, but if a taxpayer disagrees with the adjustment, they can submit documentation to dispute it. If a significant mistake is found, such as filing under the wrong status or misreporting a major deduction, filing Form 1040-X with an explanation ensures compliance and reduces the risk of further scrutiny. Keeping copies of all supporting documents, such as W-2s, 1099s, and receipts, helps substantiate any changes made.