Tax season doesn’t start until January, but that doesn’t mean it isn’t already on a lot of our minds. How can we make sure that we’re paying the right amount of tax? How can we avoid any issues with the IRS?
Making a single mistake can lead to so much stress and worry. Why not avoid all of this by learning more about common tax mistakes so that you can avoid them when the time comes to pay your taxes?
Paying taxes is already a difficult task. We’re here to make sure that it isn’t any harder than it needs to be, with the help of our guide.
Are you ready to learn more? Then read on!
1. Not Taking Advantage of Tax Breaks
The government often offers tax breaks, but, of course, the government would much prefer it if you didn’t take advantage of them. One example is the US is the Earned Income Tax Credit, which was made more accessible by a COVID-19 relief package back in December.
Access to this tax break can save you a lot of money, but you don’t just get it. You needed to take the time to calculate this particular credit and apply it to your taxes.
Many people assumed that they wouldn’t qualify for it because they never had before, and thus, paid more tax than they needed to.
If you want to build wealth, you need to dig into the latest news and information about taxes, to see which breaks you qualify for. Don’t ever assume that it’ll be the same from year to year.
2. Not Giving Yourself Enough Time
Despite the dates of tax season being common knowledge, many people still don’t give themselves enough time to file their taxes. This means that it’s incredibly easy to either rush and make mistakes or get a penalty for filing late.
You should make sure that you’ve started filing your taxes as soon as you have the year’s final figures. This way, you’ll have enough time to file and double-check everything. This can also help you get access to breaks, as you’re less likely to rush through the filing process and misread the criteria.
You should also make sure that you budget so that you can pay your taxes on time. The IRS wants its money, and you need to be able to pay on time.
3. Not Realizing What You Need to Report
Do you know every bit of income that you need to report? The fine details of exactly which income you need to report are often misunderstood. In essence, you should assume that you need to report everything, though there are sometimes exceptions.
Nontaxable income is a whole category of payments, so it’s easy to see why you might not know what income you need to report. We’d recommend that you check out the IRS’ official documents if you need help.
It’s better to report income that isn’t taxable than it is to not report income that’s taxable if you’d like to avoid the government’s wrath.
4. Entering Wrong Bank Account Details
Getting a refund from the IRS is a tremendous feeling. It’s great to receive money from the IRS, instead of it flowing the other way as you’ve experienced countless times before.
The problem is, if you enter the wrong bank account number and routing number, the IRS won’t be able to send the refund out. It can cause very long delays, which, if you’ve budgeted incorrectly, could lead to a lot less money in your bank account.
Double-check and triple-check your bank account details, and make sure that they’re correct before you file.
5. Forgetting to Sign Your Tax Return
It’s a basic mistake, but it’s one that many people have made over the years. If you don’t sign your tax return, it won’t be valid. It’s as simple as that.
If you file a joint return, you need to make sure that the other person’s signature is on the return too, or else, guess what, it won’t be valid.
Before you slip your tax return into an envelope, make sure that you’ve signed the forms.
6. Not Keeping a Copy of Your Return
If the worst happens and you get audited by the IRS, you need to have a copy of your tax return on hand. This can help you justify the return to the auditors, which will make your life so much easier.
If you file online, keeping a copy is as easy as saving the return from the IRS site. Make sure that you keep a backup too, either on a USB flash drive or in the cloud.
If you file offline, then you should use a photocopier to make a copy of your return, and then store it in a safe place.
Either way, you should store a copy of your tax return for the next three years.
7. Not Seeking Financial Help
If you’re unsure about anything on your tax return, then you need to seek financial help. Seeking tax advice from a company like WealthAbility can help you a lot.
These companies can help you understand the difficult terminology of your tax return and highlight opportunities to save money on your taxes that you may have missed otherwise.
Next time you need to file taxes, we’d recommend seeking out financial experts to help you out. They can often save you more money than it costs to hire them, and will also provide you with peace of mind.
Avoid These Tax Mistakes and File Accurately
We hope that this guide to common tax mistakes will help you. When tax season rolls around, refer back to this guide and avoid making a silly mistake that could cost you serious money.
For more helpful guides on Tax Mistakes or on any other financial facts, check out the rest of our site!