Tax season is coming! Are you dreading an IRS audit if you get something wrong?
Nobody likes doing taxes, but it’s even worse when you make a mistake and end up paying more than you should. This guide can help you avoid 6 of the most common errors taxpayers make and save you time, money, and stress.
Discover what to watch out for and put your mind at ease with this quick and easy guide to avoiding common errors for taxpayers. Read on to learn more!
Error #1 – Not Having the Right Documents Ready
As tax season approaches, it’s essential to have all the right documents ready in order to avoid any errors or delays. Having a checklist of the required forms and documents is one of the best ways to ensure that you are prepared for filing your taxes.
Error #2 – Overlooking Deductions & Credits
When filing taxes, it is important to pay attention to tax deductions and credits as they can save you a lot of money. Deductions are expenses that can be subtracted from your taxable income, while credits are tax reductions that reduce the amount of tax you owe.
Error #3 – Filing Incorrectly or Late
It’s important to understand how to file your taxes correctly and on time to ensure that you don’t end up with a bigger bill than necessary. Know when the tax filing deadline is, and try to get your taxes in early to avoid any issues.
Error #4 – Incorrectly Reporting Income Sources
Making sure you report all of your income sources correctly on your tax return is essential. Failing to do so can result in serious penalties or even tax audits, so it’s important to be aware of all the different types of income that you need to report.
Examples of common types of income include:
- Wages and salaries, including bonuses and commissions
- Interest, dividends, and capital gains from investments such as stocks, bonds, mutual funds, or real estate
- Alimony paid to you by your ex-spouse or a third party
Error #5 – Not Knowing Tax Law Changes
Staying informed on the IRS updates and any other changes that may be implemented is critical to avoid errors for taxpayers. Understanding how these new tax laws will impact your finances can help you make better decisions for your business and save time and money in the long run.
Error #6 – Claiming Ineligible Dependents
Claiming ineligible dependents on your taxes can be a costly mistake. From hefty fines to criminal prosecution, the consequences of claiming an ineligible dependent can be severe.
To avoid these risks, it is important for taxpayers to understand the rules and regulations regarding dependent eligibility and only claim those that meet the criteria. Otherwise, they may face penalties or even criminal prosecution.
Avoiding the Most Common Errors for Taxpayers
No one likes filing taxes, but it doesn’t have to be as painful as it seems. If doing taxes stresses you out, consider hiring a tax preparation service to do them for you. Millions of Americans use these services every year, and many get larger refunds back than they would by doing their taxes themselves! They achieve this by avoiding the above errors for taxpayers and instead hiring a pro.
For more insightful articles about money and financial management, be sure to check out the “Finance” section of our blog!