No one really enjoys doing their taxes, which is why a lot of us leave the whole task until the last minute. Although totally understandable, this kind of habit doesn’t do you a lot of favours! When you suddenly realise that the deadline’s around the corner, and start scrambling to get everything filled out, it can put you at risk of making all kinds of mistakes. Here are some major tax mistakes you need to avoid.
First of all, overlooking any kind of income, no matter how small. When the IRS says it requires you to claim all income from the last year, it means it! Regardless of your boss giving you a W-2 or 1099, you need to disclose all of your income down to the last penny. Go through your bank statements thoroughly and make sure all income is accounted for. You may have done a little freelance work back near the beginning of the year, or sold a couple of items online. Whatever your personal cash flow situation has been like, it’s very important that you don’t overlook any of your income. If it turns out you owe more, you’ll have extra tax, penalties and interest hanging over your head. Fighting these kinds of penalties is a long and complex process, and will usually require the help of a tax law firm like MCC4Tax.
Misunderstanding the rules of extensions is another major tax mistake which you need to avoid. It’s pretty common for people to ask for an extension to efile their tax returns, and the IRS are generally quite obliging. However, just because you’re able to file an extension doesn’t mean that you don’t have to make a payment when the deadline comes around. This is in fact one of the most common mistakes people make on their tax returns, so make absolutely sure that you don’ fall into this trap. No matter how far ahead you push it, you need to be in a position where you can make an estimate of your income, and pay the amount that you owe. Fail to do this, and you’ll hit all kinds of penalties and fees.
Finally, missing out any deductions and credits that you may have lined up. If you’re in some rushed panic to file your returns, then you may find yourself ignoring various credits and deductions with the potential to save you hundreds (if not thousands!) of dollars. Education benefits are very commonly neglected, for example. There are all kinds of different benefits, and often it can be quite hard to decipher which ones you actually qualify for, and which ones will be the best choice. For a lot of people, these things seem like just another hassle after going through the rest of the filing. However, if you don’t claim on the credits and benefits you’re entitled to, you’ll be kicking yourself for years after!
There you have just a handful of the costly mistakes you could be at risk of when filling out your taxes.