25 Common Mistakes and Myths About Filing Personal Taxes & Taxes 2025

Tax season can be stressful for many individuals, and with the ever-changing tax laws, it’s easy to make mistakes or fall prey to myths. If you're filing personal taxes in 2025, it's crucial to be aware of common errors and misconceptions that could cost you money, lead to audits, or cause you to miss out on potential deductions. To help you navigate the tax season with confidence, here are 25 common mistakes and myths about filing personal taxes in 2025.

Common Mistakes

1. Not Filing Taxes on Time

Failing to file your taxes by the deadline, which is typically April 15 (or the next business day if the 15th falls on a weekend or holiday), can result in penalties and interest. Filing an extension gives you extra time, but you still need to pay your estimated taxes on time.

2. Incorrectly Reporting Income

Not reporting all income, whether it’s from side jobs, freelance work, or cash payments, can lead to penalties or audits. Always double-check your W-2s, 1099s, and other income statements to ensure accuracy.

3. Forgetting to Claim Deductions

Many people overlook valuable tax deductions, such as those for student loan interest, mortgage interest, or medical expenses. Be sure to review all potential deductions before filing.

4. Misunderstanding the Standard Deduction

The standard deduction has increased for 2025, but many people still opt for itemizing deductions unnecessarily. If your itemized deductions are less than the standard deduction, you’re missing out on a bigger tax break.

5. Claiming Incorrect Dependents

Claiming dependents incorrectly can lead to a delay in processing or losing out on valuable tax credits. For example, a child might qualify for the Child Tax Credit, but you must ensure they meet the age and relationship requirements.

6. Overlooking Taxable Interest

Some taxpayers forget to report interest from savings accounts or other investments. Even small amounts of interest income are taxable, so don't ignore Form 1099-INT or similar statements.

7. Missing the Child and Dependent Care Credit

The Child and Dependent Care Credit helps families offset the cost of daycare, but many fail to claim it because they think they don’t qualify. Check the income and care requirements to see if you’re eligible.

8. Failing to Include State and Local Taxes

Taxes paid to state or local governments, including income, property, and sales taxes, can be deducted on your federal return. Make sure to keep track of these payments, especially if you're itemizing deductions.

9. Not Keeping Good Records

Keeping poor records or not tracking your expenses can lead to errors when claiming deductions. Maintain organized receipts, statements, and documents related to deductions or credits you plan to claim.

10. Incorrectly Claiming the Earned Income Tax Credit (EITC)

The EITC is a benefit for low to moderate-income working individuals, but it has specific rules. Common mistakes include misreporting income or failing to meet eligibility requirements, which can result in losing out on the credit or being audited.

11. Ignoring the Alternative Minimum Tax (AMT)

The AMT is designed to ensure that high earners pay at least a minimum amount of taxes. If you are a higher-income earner, failing to account for the AMT can result in an unexpected tax bill.

12. Tax Software Errors

While tax software can be incredibly helpful, it can also lead to errors, especially if you enter data incorrectly or misunderstand the guidance. Always double-check your entries and don’t rely solely on the software.

13. Not Reviewing Your Filing Status

Your filing status (single, married filing jointly, head of household, etc.) has a big impact on your taxes. Choosing the wrong filing status could mean higher taxes or missing out on certain credits.

14. Not Considering Taxable Social Security Benefits

If you have Social Security income, a portion of it may be taxable depending on your total income. Many people don’t realize that their benefits are subject to taxation when combined with other sources of income.

15. Misunderstanding Retirement Account Contributions

Contributing to a traditional IRA or 401(k) reduces taxable income, but failing to contribute enough (or making contributions after the deadline) could prevent you from maximizing deductions.

16. Incorrectly Reporting Capital Gains

Misreporting capital gains or losses from the sale of investments can lead to overpayment or underpayment of taxes. Be sure to report your gains accurately and account for any carryovers from previous years.

17. Missing Out on the Lifetime Learning Credit

Many individuals who pay for education-related expenses miss out on the Lifetime Learning Credit because they don’t realize they qualify for it. It can help offset the cost of tuition for you or your dependents.

18. Failing to Account for Cryptocurrency Transactions

In 2025, cryptocurrency transactions are still subject to taxation. Failing to report gains or losses from trading or using cryptocurrency can trigger an audit or penalties.

19. Underestimating Withholding

Many people fail to adjust their withholding after life events like getting married, having a child, or changing jobs. Incorrect withholding can result in a large tax bill at the end of the year or, conversely, an unnecessarily large refund.

20. Missing Deductions for Business Expenses

Self-employed individuals or small business owners often miss deductions for legitimate business expenses. Ensure you are claiming expenses for office supplies, travel, and equipment used in your business.

Common Myths

21. Myth: Filing Taxes Is Optional If You’re Self-Employed

Many people think that if they’re self-employed or earn cash income, they don’t need to file taxes. This is false; the IRS requires all self-employed individuals who earn above a certain threshold to file taxes, regardless of how they earn their income.

22. Myth: You Don’t Have to Pay Taxes on Gifts

While the gift tax may apply to the giver, many believe that gifts they receive are tax-free. However, large gifts or inheritances might trigger taxes on the recipient if the amount exceeds IRS thresholds.

23. Myth: Tax Refunds Are Always a Good Thing

A large tax refund might seem like a bonus, but it actually means you’ve overpaid throughout the year. It’s often better to adjust your withholding and get your money throughout the year instead of waiting for a refund.

24. Myth: The IRS Won’t Catch Mistakes

Some people believe that minor mistakes or discrepancies on their taxes will go unnoticed by the IRS. In reality, the IRS uses sophisticated systems to identify errors, and they may audit your return if they detect inconsistencies.

25. Myth: You Can Only Claim Deductions If You Itemize

It’s a common myth that you must itemize your deductions in order to claim benefits like charitable donations, medical expenses, or mortgage interest. With the increased standard deduction in 2025, many taxpayers find it better to take the standard deduction instead.

Conclusion

Filing personal taxes in 2025 can seem overwhelming, but avoiding these common mistakes and debunking myths can help you stay on top of your tax responsibilities. Whether you're a first-time filer or a seasoned taxpayer, it's important to stay informed about tax law changes and ensure your filing is accurate and complete. By being diligent and cautious, you can minimize errors, reduce your tax liability, and avoid unnecessary stress during tax season.

If you're unsure about any aspect of your taxes, consider consulting with a tax professional to ensure that you're making the most of your tax situation and staying compliant with the IRS.