Tax season can bring a welcome boost to your finances, but if you’re not careful, that refund could shrink — or disappear altogether. The IRS processes millions of tax returns each year, and small mistakes, missed documents, or incomplete information can delay or reduce your refund.
In more serious cases, it can even trigger audits or penalties. Fortunately, you can avoid these issues by staying informed and proactive.
Below, we outline the most common mistakes taxpayers make that result in lost refunds, and what you need to do to avoid running into trouble with the IRS.
Common Tax Refund Mistakes That Could Cost You
Every year, taxpayers overlook or mishandle important steps in the filing process. Here are some of the biggest mistakes:
- Incorrect banking information: If your direct deposit info is wrong, the IRS may send your refund to the wrong account — and it’s often hard to recover.
- Unreported income: Forgetting to report freelance or gig work can trigger audits and reduce your refund through penalties.
- Missing forms or schedules: Leaving out necessary forms (like 1099s or additional schedules) delays processing and may cut your refund.
- Math errors: The IRS will correct simple errors, but these often delay your refund and can reduce it if the correction isn’t in your favor.
- Filing late without an extension: Missing the deadline results in automatic penalties that reduce your refund.
Critical Step: Report All Income Accurately
The single most important thing you must do to protect your tax refund is report all sources of income — even if you didn’t receive a traditional W-2. Side gigs, freelance work, digital payments (from platforms like Venmo or PayPal), interest from savings accounts, and cryptocurrency transactions all count as income.
The IRS receives copies of 1099 forms from companies that pay you, and if your return doesn’t match what they have on file, they’ll flag it for review. In many cases, this can delay your refund for weeks or even months.
What Can Reduce or Delay Your Tax Refund?
| Issue | Impact | How to Avoid |
|---|---|---|
| Incorrect Bank Info | Refund sent to the wrong account | Double-check routing/account numbers |
| Missing Income | Audit trigger, refund reduction | Report all income sources |
| Math Errors | Processing delays | Use tax software or a professional |
| Missing Forms (e.g., 1099) | Delayed refund | Wait to file until all forms arrive |
| Filing After Deadline | Penalties and interest | File early or request an extension |
Don’t Forget These Easily Overlooked Items
Many taxpayers forget to:
- Claim dependents properly: Incorrect Social Security numbers or birth dates can reject your return.
- Update personal information: Mismatched names (due to marriage/divorce) must be updated with the Social Security Administration.
- Check eligibility for credits: The Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and education credits can significantly increase your refund — but you must meet the criteria.
These small errors can either delay your refund or reduce it without you realizing it.
Watch Out for Scams and Mistaken Identity
Another growing issue: is fraudulent filings and identity theft. If someone files a return using your information before you do, the IRS will freeze both returns until it sorts out who is legitimate. To prevent this:
- File as early as possible.
- Use IRS Identity Protection PINs (IP PINs) if available.
- Monitor your credit and tax records for unusual activity.
What to Do If You Already Made a Mistake
If you realize you left something off your return or filed incorrectly:
- Don’t panic — mistakes happen.
- File an amended return using Form 1040-X.
- Act quickly before the IRS contacts you.
- Track your amended return using the IRS online tools.
The sooner you correct it, the more likely you’ll receive your full refund — or avoid added penalties.
Final Thoughts
Getting a tax refund is always a relief, but losing part of it due to a simple mistake is frustrating and avoidable. Double-check your forms, report all income, and file on time. If you take these basic steps, you’ll avoid IRS problems and ensure you get every dollar you’re entitled to.
Tax season doesn’t have to be stressful — just stay informed, be organized, and take your time. A little caution now can save you hundreds (or thousands) later.
