Filing taxes can be stressful for anyone, but for low-income filers, small mistakes can mean losing valuable credits, delaying refunds, or even triggering IRS notices. The good news is that most of these errors are easy to avoid once you know what to watch for. Here are the most common tax filing mistakes low-income taxpayers make—and how to fix them.
1. Not Filing a Tax Return at All
One of the biggest mistakes is assuming you don’t need to file because your income is low. Even if you owe no tax, you may still qualify for valuable refundable credits like the Earned Income Tax Credit (EITC) or the Child Tax Credit. These credits can result in a refund of hundreds or thousands of dollars—but only if you file a return.
How to avoid it: If you worked during the year or had any income, check your eligibility and file a return, even if you think you’re below the filing threshold.
2. Missing Out on the Earned Income Tax Credit (EITC)
Millions of eligible taxpayers fail to claim the EITC every year. This usually happens because they don’t realize they qualify, especially if they don’t have children or their income changed.
How to avoid it: Use tax software or a free tax preparation service to check eligibility. Always review the EITC section before submitting your return.
3. Claiming the Wrong Filing Status
Choosing the wrong filing status can reduce your refund or disqualify you from certain credits. For example, some people incorrectly file as “Single” when they qualify for “Head of Household,” which offers better tax benefits.
How to avoid it: Review IRS rules for filing status carefully. If you support a dependent and pay more than half the cost of keeping up a home, you may qualify for Head of Household.
4. Making Mistakes With Dependents
Errors involving dependents are a major cause of rejected or delayed returns. Common issues include:
- Claiming a child who doesn’t meet residency or relationship rules
- Using the wrong Social Security number
- Two people trying to claim the same child
How to avoid it: Double-check names, Social Security numbers, and eligibility rules before filing. Make sure only one person claims each dependent.
5. Entering Incorrect Income Information
Leaving out income, even from a small side job or gig work, can cause problems with the IRS. The IRS receives copies of most tax forms, so mismatches can trigger notices or audits.
How to avoid it: Gather all W-2s, 1099s, and other income records before filing. Report everything, even if the amount seems small.
6. Not Claiming the Child Tax Credit or Other Credits
Some filers forget to claim the Child Tax Credit, the Credit for Other Dependents, or education and health-related credits. This often happens because they think their income is too low to benefit.
How to avoid it: Use tax software or a preparer that checks for all available credits automatically.
7. Paying for Tax Prep When Free Help Is Available
Many low-income filers pay for tax preparation when they could file for free. The IRS and many community organizations offer free, trusted tax help programs.
How to avoid it: Look for IRS Free File or Volunteer Income Tax Assistance (VITA) programs in your area.
8. Choosing the Wrong Refund Method
Paper checks take longer and can get lost. Some filers also use expensive refund advance products or high-fee prepaid cards.
How to avoid it: Choose direct deposit to a bank account for faster and safer refunds whenever possible.
9. Ignoring IRS Letters
If you make a mistake or the IRS needs more information, they will send a letter. Ignoring it can make the problem worse and delay your refund even more.
How to avoid it: Open and respond to IRS mail promptly, and follow the instructions carefully.
The Bottom Line
Most tax mistakes made by low-income filers are easy to prevent with a little preparation and attention to detail. Filing a complete and accurate return, checking for credits, and using free tools or help can ensure you get the maximum refund you deserve—without unnecessary delays or stress.
