8 Tax Return Mistakes Even Smart People Make

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It can happen to the best of us.

• Former Treasury Secretary Timothy Geithner failed to pay nearly $35,000 in Social Security and Medicare payroll taxes from 2001 through 2004.
   
• Five-time Grammy winner Lauryn Hill served prison time for owing roughly $2.3 million in taxes.
   
• Hollywood star Christina Ricci owed unpaid taxes close to $200,000 back in 2008.

Whether intentional or unintentional, tax return mistakes have big consequences. Here are eight of the most common that you have to pay special attention to.

1. Waiting Too Long

More than 90% of IRS refunds are issued in less than 21 days, but the 2015 tax season may feature longer refund wait times. This year the IRS is hit with a triple whammy: a smaller budget, greater costs, and increased tax complexity. Remember that 2015 is the first year the IRS will administer the premium tax credits and individual mandates under the Affordable Care Act.

Waiting until the last minute to file your taxes increases your chances of waiting longer than necessary for a refund. According to the IRS, one third of Americans wait until the last minute to file taxes. The longer that you wait, the longer that your tax refund (if you're expecting one!) is going to take. So, stop procrastinating and get it over with already.

2. Filing on Paper

IRS Commissioner John Koskinen has already gone on the record that the level of taxpayer service people can expect is not going to be very good this year. The Commissioner has a special warning for those filing their tax returns the old fashioned way: People filing paper tax returns could wait an extra week or longer for their refund than those who file electronically. Paper returns are handled by an actual person, and this year the IRS simply has less staff available.

Besides, people doing their taxes on paper are about 20 times more likely to make an error than e-filers. Errors in addition or subtraction are very common on paper forms and can delay processing times. Other common places for math errors are the worksheets included in some forms. The IRS asks filers to pay special attention when figuring out their Earned Income Tax Credit, Child and Dependent Care Credit, and standard deduction.

The fastest way to get your refund is to file electronically. If your tax declaration has no issues, your refund gets processed automatically.

3. Making Math and Data Entry Mistakes

Even when using a tax software program, you can still make math mistakes. While the software can add, subtract, and transfer amounts across forms, you still need to input the right amounts.

The most common of data entry errors is the transposition mistake. This happens when two digits in a larger number are reversed. For example, your W2 form may say $54,000, but you incorrectly put $45,000 into the software. Avoid this problem by double checking any time that you input an amount.

Pay particular attention when entering your bank's routing and account numbers for tax refunds by direct deposit. In the event that you enter an account or routing number that belongs to someone else, and the designated financial institution accepts the deposit, you must work directly with that financial institution to recover your funds. The IRS assumes no responsibility for this type of error.

4. Using Wrong Names

Just like numbers, names matter on tax forms. Your name, your spouse's, and your dependents' need to match the tax identification number the Social Security Administration has on file. Any mismatch could cause delays in processing time.

If you legally change your name because of marriage, divorce, court order, or any other reason, you need to apply for a new Social Security card in order to use your new name on a tax form. Getting an updated SSN card is free and can be completed via email or at your local Social Security office.

5. Forgetting Signatures

An unsigned tax return is not valid. Be aware that both spouses must sign a joint tax return. When filing your paper return, make sure to gather all necessary signatures before mailing it out. Don't forget to include the date next to the signatures.

Any tax software requires you to sign using a personal identification number. The tax software should explain the e-signature process to you, or you can get your electronic filing PIN on your own. Either way, you'll need the Adjusted Gross Income from your original (not any amended) last year's federal tax return.

6. Failing to Ask for an Extension for Payment by April 15th

Uncle Sam is one guy that you don't want to owe money to. From wage garnishments to liens on your properties, the IRS has a scary arsenal of debt collection tactics. The first step in solving your tax payment problems is to file on time and request a filing extension with IRS Form 4868 by midnight on April 15th.

This way you only pay a monthly penalty of half of 1% of any tax that you owe, instead of 5%. If you can show reasonable cause for not paying on time, attach a statement to your return explaining the reason. In some cases, the IRS may waive the late penalty payment. Also, even if you can't pay in full at the time of filing, try to pay as much as possible to minimize fees.

No matter what your circumstances are, make sure to file federal taxes by the April 15th deadline. Then, work out how to pay the remaining balance to the IRS. (See also: Can't Pay Your Taxes? Here's What to Do)

7. Paying for Tax Preparation

Certain taxpayer groups are eligible for free tax return preparation.

• Volunteer Income Tax Assistance: People making $53,000 or less per year, persons with disabilities, seniors, and limited English-speaking taxpayers can get free basic income tax return preparation from IRS-certified individuals. Call 1-800-906-9887 for more information.
   
• Tax Counseling for the Elderly: Individuals age 60 or older can receive free tax help and assistance.
   
• IRS Free File: Any taxpayer with an adjusted gross income of $60,000 or less can file federal taxes for free. Some state returns are available and some are free.
   
• On-campus tax prep: During tax season, many colleges and universities offer free tax prep services for qualifying students.

However, if you're a small business owner or self-employed, you should consider hiring a professional. If you use Schedule C, you're almost three times more likely than a corporation to receive an audit. Any "creative accounting" that can't be proved gets slapped with a 25% inaccuracy penalty from the IRS on top of any applicable taxes and interest. Better safe than sorry. (See also: 4 Times You Should Splurge and Hire a Pro)

8. Not Filing Taxes When Living Abroad

The IRS is very clear in that any U.S. citizen or green card holder is subject to U.S. federal income tax whether he or she is in the U.S. or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

The rules for state income taxes for U.S. citizens and green card holders abroad vary from state to state. Wyoming, Washington, Texas, South Dakota, Nevada, Florida, and Alaska don't collect state income taxes, so former residents of those states don't have to worry.

Make sure to file the applicable tax returns every year. You're lucky that you may be allowed an automatic two-month extension to file your return and pay any federal income tax that is due. U.S. expats in England, France, and Germany can get help directly at the IRS permanent offices in those countries. All other U.S. expats should review the International Taxpayers section of the IRS website.

Have you ever made any of these — or any other — tax filing mistakes?