5 Costly Mistakes to Avoid When Preparing Your Tax Returns in 2025

With Tax Day just around the corner, many people are rushing to prepare their returns in an effort to avoid incurring interest and penalties. But, while it is important to file your taxes on time, it is also important to file them correctly. Mistakes can prove costly, and they can even lead to allegations of criminal tax evasion or tax fraud in some cases. Learn more from Boston IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.

Costly (and Common) Tax Mistakes to Avoid in 2025

Each year, we hear from numerous taxpayers who are facing IRS scrutiny due to mistakes they made when filing their annual returns. While these mistakes can take many different forms, some are more common than others. Here are five of the most common examples:

1. Improperly Claiming a Past-Due Refund

As the Internal Revenue Service (IRS) explained in a recent News Release, many taxpayers are eligible to claim tax refunds from prior years. This includes an estimated 27,000 taxpayers in Massachusetts who are eligible to claim refunds for the 2021 tax year—and who must claim these refunds by April 15, 2025.

Improperly claiming a past-due refund can prove to be a very costly mistake. If you fraudulently claim a refund from the IRS, this has the potential to lead to charges for tax fraud and other federal tax crimes.

2. Improperly Claiming Credits, Exemptions or Deductions

Improperly claiming credits, exemptions or deductions can prove very costly as well. Just because a credit, exemption or deduction is generally available, this doesn’t necessarily mean that it is available to you. If you improperly claim a credit, exemption, or deduction in order to reduce your federal income tax liability, this can expose you to civil or criminal enforcement action.

3. Underreporting Your Gross or Taxable Income

Many people try to reduce their tax liability by underreporting their income to the IRS. This frequently includes choosing not to report income from gig work, gambling winnings or investment gains. However, since companies, casinos, brokerage firms, and other entities are required to report contractors’ and customers’ income to the IRS as well, even if you don’t report your income, the IRS will still likely know how much you earned in 2024.

4. Falsely Claiming Investment, Gaming or Gambling Losses

Falsely claiming investment, gaming, or gambling losses is another common—and dangerous—way to attempt to avoid federal income tax liability. If the information in a taxpayer’s returns is inconsistent with the information that the IRS receives from a brokerage firm or another third party, this is highly likely to lead to intensive (and high-risk) scrutiny.

5. Blindly Relying on Tax Software or a Tax Professional

Blindly relying on tax software or a tax professional is an all-too-common mistake as well. As the IRS makes clear, taxpayers are ultimately responsible for the contents of their returns, and relying on tax software or a tax professional is not an excuse for underreporting or underpaying your federal income tax liability.

Request a Confidential Consultation with Boston IRS Tax Lawyer Kevin E. Thorn

Do you have questions or concerns about federal income tax compliance in 2025? If so, we invite you to get in touch. To request a confidential consultation with Boston IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 617-692-2989 or contact us confidentially online today.