Navigating the 2026 Tax Season: Critical Errors That Could Cost You Thousands
- Thomas DiLullo
- Jun 17
- 4 min read
Updated: Jun 17
Taxpayers face heightened risks from evolving IRS enforcement strategies, inflationary penalty adjustments, and increasingly sophisticated scams. Thomas F. DiLullo, a seasoned CPA and tax attorney with over 40 years of experience, emphasizes that even minor filing mistakes can now trigger severe financial penalties or legal repercussions. This article breaks down the most dangerous tax errors of 2025, supported by IRS data and real-world insights, to help you avoid costly missteps.
Why 2026 Tax Errors Are Riskier Than Ever
The IRS has significantly increased penalties for 2025, reflecting both inflation adjustments and a renewed focus on compliance.
For example:
Late filing penalties now start at $525 (up from $485 in 2024) for returns submitted over 60 days past the deadline, with additional monthly charges of 5% of unpaid taxes.
Late payment penalties accrue at 0.5% per month, compounding until balances are settled
Businesses face steeper consequences, including $255 monthly penalties for overdue partnership returns
These changes coincide with the IRS’s expanded enforcement budget, which has enabled more audits and stricter scrutiny of questionable deductions, cryptocurrency transactions, and gig economy income.
The Worst "Dirty Dozen" Scams Targeting Taxpayers
The IRS’s annual Dirty Dozen list highlights emerging threats that could lead taxpayers into accidental noncompliance or identity theft. Key risks include:
Social Media Tax Myths Platforms like TikTok and Instagram are rife with bad advice, such as claims that taxpayers can “legally” avoid taxes by misusing Form 1099 or inventing fake dependents. These schemes often result in audits, penalties of 20% of underpaid taxes, or criminal charges if fraud is suspected.
Phishing and Smishing AttacksFraudsters impersonate the IRS via email or text, often using urgent language like “Your account is on hold!” to steal Social Security numbers or bank details. The IRS never initiates contact via email, text, or social media.
Ghost Preparers Unlicensed tax preparers who refuse to sign returns or demand cash payments frequently make errors that leave clients liable. In 2024, the IRS penalized over 1,200 ghost preparers for fabricating deductions or inflating refunds
Fake Charities Scammers exploit natural disasters or geopolitical crises to solicit
donations to fraudulent organizations. Only contributions to IRS-recognized 501(c)(3) entities are tax-deductible
“A single error can spiral into years of audits, penalties, and stress—but with careful planning, it’s entirely avoidable.”
Top 7 Tax Filing Errors to Avoid in 2026
Thomas F. DiLullo identifies the most common—and costly—mistakes he’s seen in his practice:
Incorrect Filing Status Choosing “Single” instead of “Head of Household” can cost $1,500+ in missed deductions for eligible taxpayers. For example, Head of Household status offers a $22,500 standard deduction versus $15,000 for Single filers.
Math Errors Miscalculations accounted for 18% of IRS correction notices in 2024. While tax software reduces errors, manually entered data (e.g., capital gains or rental income) remains a risk.
Unsigned Returns Over 300,000 taxpayers annually forget to sign returns, causing processing delays and penalties. E-filers can avoid this by using digital signatures.
Overlooked Income Failing to report side hustle earnings, cryptocurrency sales, or freelance income is the **#1 triggeror audits. The IRS matches filings against 1099s and W-2s, and discrepancies prompt automated notices.
Ineligible Credits Claiming the Earned Income Tax Credit (EITC) without meeting residency or income requirements led to $16.9 billion in improper payments in 2024. The IRS now flags high-risk EITC claims for pre-refund reviews.
Rushing to File Submitting returns before receiving all 1099s or K-1s often results in amendments. For example, a corrected 1099-B for stock sales could alter capital gains taxes by thousands of dollars.
Ignoring State Taxes New Jersey residents face additional pitfalls, such as unclaimed property tax deductions or mishandling the $6,000 senior citizen exemption.
How to Protect Yourself: Expert Strategies
DiLullo recommends a proactive approach to avoid penalties:
Double-Check Documents
Verify Social Security numbers, income amounts, and direct deposit details.
Use IRS Form 4506-C to request wage transcripts if you’ve lost W-2s6.
Consult a Professional
A CPA or tax attorney can identify overlooked deductions (e.g., energy credits or student loan interest) while ensuring compliance.
File an Extension if Needed
Requesting an extension by April 15 moves your deadline to October 15 but doesn’t delay payment obligations.
Monitor Your Account
Create an IRS Online Account to track refunds, payments, and notices. Beware of third-party sites charging fees for this free service.
FAQs: Your Top 2026 Tax Questions Answered
What happens if I file my taxes late?
Penalties start at $525 + 5% of unpaid taxes per month (up to 25%). Interest accrues at 8% annually
Can the IRS prosecute me for honest mistakes?
While negligence penalties (20%) are common, criminal charges require proof of willful fraud, such as hiding offshore accounts
How do I spot a tax scam?
The IRS will never demand immediate payment via gift cards, threaten arrest, or contact you without prior mailed notice
Final Thoughts
With IRS penalties at record highs and scams proliferating, meticulous filing is no longer optional. As DiLullo notes, “A single error can spiral into years of audits, penalties, and stress—but with careful planning, it’s entirely avoidable.” Taxpayers should prioritize accuracy over speed and seek professional guidance for complex situations.
Need Help? Our firm offers audit defense, penalty abatement, and strategic tax planning for New Jersey residents.
