How I Almost Missed Out On A $2100 Tax Refund

I have relied on tax preparation software to guide me through filing my tax return for the last 20 years. It’s easy to be lulled into a feeling of safety, believing the software will help you accurately fill out your tax return while identifying all your deductions and credits based on your answers. The reality is, the tax software is only as good as the answers you give it, and if you don’t have a basic understanding of what’s going on with your return you could end up missing out on a huge refund. It almost happened to me this week. One small error just about cost me $2100.

My taxes this year were very much like the last several years, with one exception. I now have a child in college, and had read that I was eligible for the American Opportunity Tax Credit. I answered the questions and expected my refund to skyrocket. It didn’t. I just stared at the screen that said I did not qualify for any education credits. I went back through the questions, I looked at the actual worksheet filled out by the software and couldn’t figure out why it was filling a zero for the amount of credit I was eligible for. I read document after document on the IRS website, and I was sure I qualified. Then, I found my mistake. I had forgotten to click the box saying my son was enrolled at least half time in college. Once I did that, my refund increased by $2100.

Forgetting to click one box might have cost me $2100.

To be honest, I almost gave up. I had talked myself into believing that somehow I wasn’t eligible for the tax credit. But doubt lingered, and I persisted in my investigation. Had I not had IRS documents in front of me that suggested I should get the credit, I may have missed out on some extra cash.

If you use tax preparation software, you may want to keep these points in mind:

  • Read the questions carefully: Finishing your tax return is not a race. It’s better to be careful, methodical, and accurate.
  • Understand what has changed since last year: If a major life event has occurred in the last year, it may have an impact on your tax return. Research online what those changes are, and make sure your tax return reflects what you’ve researched.
  • Look at the worksheets: The first indication that something was not right in my scenario was there was a value I didn’t expect entered into a worksheet outside of the main 1040 tax return. These won’t be shown to you explicitly unless you go into the menu of the software and specifically display the worksheet.
  • Look over your return: Once you think you’ve completed your return, let it sit for a day or two, and then look it over again before submitting to the IRS.
  • Consider a professional: If you’ve had major life events In the last year, you may consider having a professional look over your return. It will cost some money, but by doing so you will ensure it’s done correctly, and then you can just follow it’s example in the future.

Filing a tax return is a complicated process. Tax preparation software is a great way to do your taxes on your own and save money, but you have to be careful when three are changes in your tax return. If you don’t know how the change impacts your tax return you may end up missing out on a $2100 refund.

How about you EOD Nation, do you use tax preparation software? Have you ever almost made a mistake that would have cost you major cash?

About Travis

4 Responses to “How I Almost Missed Out On A $2100 Tax Refund”

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  1. I use tax prep software, but I think you’re right, that you need to have a good understanding of what’s behind the questions. If I think my return isn’t being calculated correctly, I’ll try different software to either confirm or change my understanding. Glad you caught your mistake!

    • Travis says:

      Trying different software, asking a professional, or internet searching are all valid ways to determine if your return is accurate. Even if the chances of being audited are low, the taxes and penalties add up fast if you made a mistake – even if it was unintentional.

  2. Money Beagle says:

    If you were expecting it and it wasn’t showing up, I would expect that some quick internet searches would have told you what would have made you qualify for this, and even what box to check on the form. I think more people lose out on refunds because they don’t even have an idea that they might qualify, so they don’t look for it. In your case, it sounds like you had that awareness and I’m confident you probably would have found it eventually.

    • Travis says:

      Thanks for commenting, Money Beagle! My point is, I *thought* I qualified, but it would have been easy for me to think that I missed something, and the tax software was right. But I did exactly what you mentioned and looked at the IRS pages over and over, along with finding the right worksheet within the software. Never **assume** the software is doing everything it can – as mentioned, it’s only as good as the answers you give it. The hope would be that the questions would guide you to claiming the refunds you are eligible for even if you didn’t know they existed. But if life changes have occurred, that might be a good time to visit a professional at least for one year.

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