An accountant says a tax mistake that's easy to make could cost you time and money

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• Tax software is appealing because of its affordability, but it can make it easy to file incorrect information.
• Sometimes, people will see a high estimate for their refund and fail to finish filling everything in.
• It's worth working with a tax professional to avoid errors, especially if your tax situation is complex.

For over a decade, I've worked in the tax preparation industry, helping individuals and small businesses navigate the complexities of filing their annual tax returns.

Though the introduction of self-preparation tax software has allowed millions of taxpayers to file their returns on their own with seemingly more convenience and lower cost, in practice, many of these self-prepared returns end up costing taxpayers more time and money in the long run.

Here's the problem: Many of these self-preparing tax systems allow taxpayers to view their refund or liability as the taxpayer continues to enter in their information. That can influence the way taxpayers report their tax information and ultimately make some inaccurate decisions in reporting their tax information.

Tax software creates a temptation to submit incorrect information

Preparing your own tax returns at a lower cost sounds both empowering and economical to an ordinary taxpayer. In many cases, this can be true if your return is simple, you have a basic understanding of the tax code, and you are honest and confident enough to prepare the returns yourself.

When you use tax software, you usually first need to enter in your personal information, confirm your filing status, and add your dependents' information. Those details are all required for filing, but they don't necessarily add to or from your tax refund until you reach your taxable income.

Once you enter just one source of income, your tax software typically already shows your calculated refund or tax liability even before you finish entering all of your tax information. The problem is that some tax credits, such as the earned income credit, are larger if you make less money.

We can't deny that seeing a super high refund can be very exciting for most of us. To get all of that money back, you'd want to submit the return as is. However, it begins to get tricky when you need to add more income to the returns.

After amending hundreds of self-prepared returns, what I've seen is that taxpayers will actually go ahead and submit the return with whatever information they entered that got them the highest amount initially, even if it's incorrect.

Sometimes, they may assume that they can just file the other form and information later, but that is not how the tax code works. All of the transactions that happened during the tax year need to be filed on the tax return for that specific tax year by the appropriate tax deadline.

The problem with displaying a tax refund or liability prematurely is that without a proper understanding of how the tax code should appropriately be applied, taxpayers can be tempted to incorrectly file their returns before all the necessary information and tax forms have been entered to complete the full return.

The consequences of overestimating refunds

It can be tempting to utilize self-repairing systems to report your tax information in a way that results in a higher refund than what it should actually be. Taxpayers should be very aware of the potential consequences, which can become very costly.

People who incorrectly claim tax deductions and credits by under or overreporting income may have to repay those incorrectly claimed tax benefits with the addition of interest and penalties if assessed.

Business owners that self-prepare their returns and understate income or overstate deductions may be subject to underpayment penalties and interest if their return is audited and these tax positions are disallowed.

In many cases, the IRS can easily flag the return once the information submitted doesn't reconcile with what it has in its system. The taxpayer may be sent a notice to rectify the return, asked to amend their return, or at risk for a tax audit. These are all very costly, time-consuming, and headache-inducing situations.

It's worth consulting a tax professional

Using tax software to self-prepare is very appealing for its convenience and affordability, but I encourage taxpayers to think twice before relying solely on it, especially if they have a more complex tax profile.

As a tax professional, I know how much attention to detail is required when it comes to accurately reporting income and deductions. A small oversight — such as failing to properly report freelance income or failing to check every form for accuracy — can lead to major headaches later on.

If you want to avoid costly mistakes this tax season, remember that accuracy is more important than speed and upfront costs. Sometimes, that means taking the time to work with a professional who can guide you through the process and ensure your return is both accurate and complete.