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Seeking the biggest tax refund is a smart strategy – but only if your return is valid and accurate.
Taking bad advice just to maximize your tax refund is one of the biggest mistakes you can make. Here are five refund “boost” tips that could backfire, according to tax experts.
1. Claiming credits you don’t qualify for
One of the most reliable ways to get the attention of IRS auditors is to claim the credits that prompt the largest refunds, according to Philip Zagoty, JD, certified public accountant (CPA), principal. North Star Law Firm in Houston and co-author of “Taxed: A Taxpayer’s Guide to Tax Defense and Resolution.”
If you are advised to look for credits that you do not qualify for, you will face severe penalties.
“Claiming a dependent who does not meet the residency test, or claiming the education credit for a student who is not enrolled half-time, can result in a two-year restriction on claiming the (Earned Income Tax Credit),” Zagoty told GOBankingRates. “And it will cost you much more than an increased refund.”
2. Increase or itemize Schedule C business deductions
Every tax season, people are told starting a business is “the key to a big refund,” Zagoty said. The result is that “many people claim they barely work and make up for it with personal expenses disguised as write-offs.”
The problem is that the IRS uses statistical scoring models to mark returns with deductions that are out of proportion to income.
“If you can’t support it with documentation, you’re facing a 20% accuracy-related penalty on top of your tax owed,” Zagoty said.
3. Claiming unspecified cash donations
According to one blog, stricter IRS standards in recent years have made it much harder to deduct small cash donations. Intuit TurboTax. If you receive notices claiming undocumented cash donations, be cautious.
“The IRS expects you to be able to document all donations you make to charity, and may disallow them on audit if you are unable to do so,” TurboTax explains. “Throwing some money in a collection plate for a charitable cause, or in a jar at work, risks being snatched away if the IRS closely scrutinizes your return.”
4. ‘Forgetting’ to report income
As Zagoty said, the IRS has an automated matching program that can catch discrepancies between the income you report and the income you have on file. If you’re caught underreporting income to get a bigger refund, you’ll have to pay taxes plus penalties and any interest owed past the filing deadline.
“Giving up freelance income or crypto profits doesn’t boost your refund, it just puts you on a timer,” Zagoty said.
5. Getting tax advice from TikTok or AI chatbots
Social media and AI tools have “created a wave of reliably inaccurate tax advice,” Zagoty said. “These sources do not know your facts, do not understand current law and they cannot represent you when the IRS sends a notice.”