Tax Mistakes That Could Cost You

The US tax code is complex and ever-changing, making it easy to make mistakes on your tax return. Even small errors can lead to costly penalties and interest charges. That’s why it’s important to be aware of the most common tax mistakes and how to avoid them.

Here is a more detailed look at the top 10 tax mistakes to avoid:

1. 1. Not filing on time. The IRS imposes a penalty of 5% per month, up to a maximum of 25%, for late-filed returns. If you can’t file on time, be sure to file for an extension. You can do this by filing Form 4868.
   2. Missing or incorrect information. Make sure to carefully review your return before submitting it to ensure that all of the information is accurate. This includes your Social Security number, name, address, and filing status. You should also double-check your income and deduction amounts.
   3. Math errors. Tax forms can be complex and confusing, so it’s easy to make math errors. Use tax preparation software or a calculator to double-check your calculations. You can also ask a friend or family member to review your return for you.
   4. Falling behind on the latest tax news. The tax code changes frequently, so it’s important to stay up-to-date on the latest changes. You can do this by visiting the IRS website or subscribing to a tax newsletter. You may also want to consult with a tax professional to ensure that you are taking advantage of all of the latest tax breaks and deductions.
   5. Not keeping a copy of your return. You should keep a copy of your tax return for at least three years, in case you are audited. You may also need a copy of your return for other purposes, such as applying for a loan or mortgage. You can store your tax return electronically or in paper form.
   6. Inaccurate account numbers. If you are having your refund direct deposited or if you are making an electronic tax payment, be sure to double-check your bank account and routing numbers. Entering incorrect information can delay your refund or result in penalties and interest on late payments.
   7. Missing a tax break. The IRS offers a number of tax credits and deductions, but many taxpayers miss out on them because they are unaware of them or they don’t know how to claim them. Be sure to review the IRS website or consult with a tax professional to learn about the tax breaks that you may be eligible for. Some common tax breaks include the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit.
   8. Filing the wrong tax forms. There are a variety of different tax forms available, so it’s important to choose the correct one for your situation. If you are unsure which form to file, you should consult with a tax professional. For example, if you are self-employed, you will need to file Schedule C to report your business income and expenses.
   9. Filing under the wrong status. Your filing status affects your tax rate and the deductions and credits that you are eligible for. Be sure to choose the correct filing status on your return. Your filing status is determined by your marital status and whether you have any dependents.
   10. Not filing at all. Even if you cannot pay your full tax bill, you should still file a return. If you fail to file a return, you may be subject to penalties and interest. You may also be unable to get certain tax credits, such as the Earned Income Tax Credit.

In addition to the above, here are some other tax mistakes to avoid:

• • Overstating your deductions.The IRS carefully scrutinizes deductions, so it’s important to be honest and accurate when claiming them. If you are unsure whether a deduction is allowable, consult with a tax professional.
  • Not paying estimated taxes.If you expect to owe more than $1,000 in taxes for the year, you may be required to pay estimated taxes throughout the year. Failure to pay estimated taxes can result in a penalty.
  • Filing an amended return without good reason.Amending your return can be a complex process, so it’s important to only do so if necessary. If you are unsure whether to amend your return, consult with a tax professional.

Here are some additional tips for avoiding tax mistakes:

• • Start early. Don’t wait until the last minute to start preparing your tax return. This will give you more time to gather your documents and double-check your work.
  • Be organized. Gather all of your tax documents in one place before you start preparing your return. This will make the process easier and less stressful.
  • Use tax preparation software. Tax preparation software can help you to avoid making math errors and can ensure that you are claiming all of the deductions and credits to which you are entitled.
  • Have your return reviewed by a tax professional. If you are unsure about anything on your return, have it reviewed by a tax professional before you submit it. This can help to catch any errors that you may have missed.

Here are some specific tips for avoiding common tax mistakes:

• • To avoid missing or incorrect information:
    • Make sure to update your address with the IRS if you have moved.
    • Double-check your Social Security number and name to make sure that they are spelled correctly.
    • If you are married, make sure that you and your spouse are filing under the correct filing status.
  • To avoid math errors:
    • Use tax preparation software to do your calculations for you.
    • Double-check your calculations with a calculator or have someone else review them for you.
  • To avoid falling behind on the latest tax news:
    • Subscribe to a tax newsletter or visit the IRS website regularly for updates.
    • Consult with a tax professional to make sure that you are taking advantage of all of the latest tax breaks and deductions.
  • To avoid missing a tax break:
    • Review the IRS website or consult with a tax professional to learn about the tax breaks that you may be eligible for.
    • Be sure to claim all of the deductions and credits that you are entitled to on your tax return.
  • To avoid filing the wrong tax forms:
    • Consult with a tax professional to determine which tax forms you need to file.
    • Make sure to file the correct forms for your income and tax situation.
  • To avoid filing under the wrong status:
    • Determine your filing status based on your marital status and whether you have any dependents.
    • Be sure to file under the correct filing status on your tax return.

By following these tips, you can avoid making common tax mistakes and ensure that you file an accurate and complete tax return.