4 Common Tax Refund Mistakes to Avoid — and What to Do Instead

Tax season can feel like navigating a financial maze, but for many, the light at the end of the tunnel is that tax refund. It's a welcome relief — a chance to save, pay off debt, or tackle important expenses. But mistakes during the filing process can reduce or delay your refund, sometimes by months. The good news? Many of these errors are entirely avoidable.

This guide will walk you through the common tax refund mistakes taxpayers make, and how to avoid them. Whether you're filing for yourself, managing taxes for a small business, or preparing returns for others as a financial planner, these insights can help you stay on course and maximize your refund.

What is a Tax Refund?

Before we tackle common mistakes, let's break down what a tax refund is. Essentially, a tax refund is the government returning the excess money you paid throughout the year — usually in the form of payroll withholdings or estimated tax payments. It’s your money, but receiving it back depends on filing your taxes accurately.

Here’s how it’s calculated:

• Overpayment occurs when too much tax is withheld from your paycheck or when extra credits further reduce tax liability. 

• Refundable tax credits, like the Earned Income Tax Credit (EITC) or Child Tax Credit, can also boost your refund even if you have no tax liability. 

Factors That Affect Refund Size

1. Income Levels – Higher or irregular income can complicate withholdings, creating over- or underpayments. 

2. Tax Deductions and Credits – The more applicable deductions or credits you qualify for, the bigger your potential refund. 

3. Filing Status – Single, married filing jointly, head of household — it all impacts your tax responsibility.

Common Tax Refund Mistakes

Mistakes during tax season don’t just delay your refund; they can result in underpayment, legal penalties, or even an audit. Below are four major pitfalls that taxpayers encounter:

1. Filing with Incorrect Information 

With tons of forms and numbers to enter, it's easy to make typos or leave details blank. Incorrect Social Security Numbers (SSNs), account numbers for direct deposit, or even mismatched names can lead to rejection or delay. 

2. Missing Out on Deductions and Credits 

Every year, millions of taxpayers leave money on the table by not claiming all the tax credits or deductions available to them. Commonly overlooked opportunities include:

• Student Loan Interest Deduction 

• Childcare Tax Credits 

• Self-Employment Deductions (for freelancers and contractors)

3. Not Updating Personal Information 

Have you moved recently? Got a new bank account? Name change after marriage? If your personal information isn’t updated, it could interfere with direct deposit or refund checks.

4. Filing Past Due Returns 

Procrastination during tax season isn’t just stressful — it can cost you. Late filing often incurs penalties, and unfiled tax years can make eligibility for refunds or credits impossible if the statute of limitations expires.

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The Real Costs of These Mistakes

Filing errors aren’t just inconvenient — they carry real financial and legal consequences. Here are just a few examples of how these simple errors can lead to delays and money loss. 

• Example 1: A small business owner mistyped their EIN (Employer Identification Number), causing a 3-month refund delay. 

• Example 2: A freelancer forgot to deduct home office expenses, forfeiting $2,000 in savings. 

• Example 3: A couple filing jointly didn't realize they qualified for the Child Tax Credit. By leaving it off their return, they missed $3,600. 

These scenarios underline why even “minor” errors can derail your financial plans.

How to Avoid These Common Tax Refund Mistakes

The best ways to sidestep common tax refund mistakes? Knowledge, preparation, and leveraging the right tools. Here’s how to get it right:

1. Triple-Check Your Information 

• Verify SSNs, names, and filing statuses. 

• Double-check account or routing numbers for direct deposits. 

• Use IRS-provided e-filing tools, which often flag incomplete or incorrect information.

2. Claim Every Credit and Deduction 

• Keep an organized file of receipts, invoices, and statements. 

• Use apps or tools to track expenses throughout the year. 

• Familiarize yourself with credits and deductions relevant to your situation. Not sure where to start? The IRS website offers a comprehensive list. 

3. Keep Your Records Updated 

Update your address, banking details, and marital status with both the Social Security Administration and IRS before filing your tax return. 

4. File On Time (or Early) 

• Mark tax deadlines clearly on your calendar. 

• Consider filing as soon as you have all the necessary paperwork. 

5. Use Technology or Professional Help 

• Online platforms like TurboTax or H&R Block often identify common deductions and calculate your refund. 

• Complex returns may benefit from hiring a CPA or Enrolled Agent. They’ll ensure no stone is left unturned and your taxes are filed accurately.

Many of these tools and professionals offer audit protection or support, providing additional peace of mind.

Be Proactive for a Stress-Free Refund Season

Tax refunds are a chance to reclaim money you earned. A little extra effort during tax season can mean a bigger refund and fewer headaches. By avoiding common mistakes like incorrect information or missed deductions, you can ensure that your refund arrives on time and in full.

At Stash, we believe financial literacy is the foundation of financial empowerment. Smart tax planning is more than a once-a-year task — it’s an opportunity to build confidence in managing your money.