I Asked ChatGPT Which Tax Filing Mistakes Cost the Most — Here Are 6 Errors To Watch For
Now’s the time: You’re ready to file your taxes. You’ve set aside hours on your weekend and made a strong cup — or, let’s be real, a pot — of coffee. Your laptop is fired up. Though you’re plugged in and mightily caffeinated, you might not be as ready as you think — not if you’re unaware of costly filing mistakes.
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To get a sense of some common and expensive errors that can trip up the average taxpayer, I turned to ChatGPT. I asked the AI for the filing mistakes that could cost tax filers like you the most. Here’s what it said — and what you should look out for.
1. Not Reporting All Income
Daily life is busy. It’s easy to forget even important things, like the income you need to report to the Internal Revenue Service (IRS) — especially if you’re a freelancer or have a side hustle.
The AI is clear: “The IRS receives copies of most income forms (W-2s, 1099s, brokerage statements). If you forget to report income, their system usually catches it.”
ChatGPT shared some commonly missed forms of income:
Freelance or gig work (1099-NEC)
Investment income (dividends, capital gains)
Side hustles like ride-hailing or online selling
Why is this error so costly? Forgetting to report income could lead you to owe additional taxes as well as interest on the unpaid amount — and you may face penalties, too. You don’t need to deal with that, so track everything and report it. If you’re juggling multiple income streams, consider reconciling your forms (W-2s and 1099s) against your bank deposits before you hit submit.
2. Claiming Credits You Don’t Qualify For
This is another easy mistake to make, especially if you don’t fully understand certain credits or how they work. Still, these errors can be costly — since refundable credits can be quite large.
ChatGPT suggests you look more closely at some of the more commonly misunderstood — and erroneously claimed — credits, such as:
Earned Income Tax Credit
Child Tax Credit
American Opportunity Tax Credit
If you’re at all confused about which credits you can claim, consult an expert instead of going it alone. Making a mistake could mean you’ll have to repay the credit or incur possible penalties.
Your pal ChatGPT is seriously warning you. “In serious cases, the IRS can ban you from claiming certain credits for up to 10 years,” it wrote.
3. Incorrect Filing Status
One of the first — and most important — questions you’re asked when filing your taxes is your status. Certain statuses, like the head of household filing status, can reduce your taxes, which makes them feel all too tempting. But you must qualify for them.
Point blank: If you don’t support a qualifying dependent, you shouldn’t claim head of household. If you’re caught, you could face the loss of lower tax rates or be forced to repay improper benefits. If you’re not sure, slow down here — this one choice can ripple through your eligibility for credits and deductions.
4. Forgetting To Report Investment Transactions
You’re accustomed to reporting income through your 9-to-5 job or your side hustle. However, you might not be used to reporting your investment transactions. You should get used to it, since brokerages report trades to the IRS.
“If you leave them off your return, it can look like 100% profit,” warned ChatGPT. “This mistake can easily add thousands in extra taxes.”
The most common issue involves selling stocks without reporting the cost basis. In that case, the IRS may treat the cost basis as $0 unless it has the correct information — which can make your taxable gain look much bigger than it really is.
The AI encourages you to look out for relevant forms like Form 1099-B and Schedule D (Capital Gains and Losses). Also watch for differences between short-term and long-term gains, since they can be taxed at different rates.
5. Not Filing at All (When You Owe Taxes)
This mistake is a big one, for obvious reasons. No wonder ChatGPT calls it “one of the most expensive mistakes.”
To further emphasize that point, the AI lists some of the very scary-sounding penalties that the IRS may charge you:
Failure-to-file penalty: generally up to 25% of unpaid taxes
Failure-to-pay penalty
Interest
As if you weren’t sufficiently alarmed, ChatGPT cautioned that “these charges compound quickly.” Even if you can’t pay in full, filing on time (or requesting an extension) can help limit the damage.
6. Missing Major Deductions or Credits
Despite all its warnings about the fees and penalties that can come with certain mistakes, the AI added that sometimes the costliest mistake involves leaving money on the table in the form of missed credits or deductions.
Ever-helpful, ChatGPT listed a few of the most commonly missed credits and deductions:
Child and Dependent Care Credit
Saver’s Credit (also called the Retirement Savings Contributions Credit)
Traditional IRA deductions (if you qualify)
When you don’t take advantage of these opportunities, you could lose hundreds or thousands of dollars in refund money. Talk about a costly mistake. A quick way to reduce misses: review last year’s return and confirm whether those credits or deductions still apply this year.
The Bottom Line
Look, you’re only human and prone to human error — even when you’re doing your taxes. But some mistakes are costlier than others. ChatGPT can point out the common mistakes to be wary of; to make sure you don’t make them, consulting a professional tax preparer may be in your best interest.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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