Mistakes You Need to Avoid When Doing Taxes
Are you one of those who dread filing tax returns? While it can be unpleasant to prepare your tax returns, it is an obligation that you have to fulfill to the IRS. While doing so, you would better take your time to double-check for any glaring mistakes that, if not handled, can hold up your refunds, or worse still, lead to a full-fledged tax audit.
You have probably sent your tax returns to the IRS in the past, only to get a notice in the mailbox a few weeks later informing you that you did something wrong. The notice could be something trivial, but you have to beware of the mistakes you need to avoid when doing taxes for whatever it is worth.
Implications of tax returns mistakes
Making a mistake(s) while filing your tax returns could cost you money. And whatever the nature or magnitude of the mistake, it could imply that your refund is held up until the IRS straightens out all matters. Whether it is identifying the right filing status or simple arithmetic errors, most people always seem to fumble around with this information.
For this reason, you could consider hiring a professional to handle the write-offs that most people are always almost certainly primed to miss. Alternatively, you could employ the services of tax monitoring software and applications to track your financials. We cannot overemphasize the importance of accuracy while filing tax returns.
Among others, making mistakes while doing taxes could imply that:
- You miss out on a huge tax refund that you initially claimed and consequently winded up owing more taxes to the IRS.
- You could accrue more interest or tax penalties.
- You could prompt a tax audit by the Internal Revenue Service (IRS).
The ideal scenario would be to avoid all the repercussions mentioned above. And no better way to do that than avoid errors and mistakes while doing your tax returns.
Mistakes to avoid
Arithmetic errors
On the subject of numbers, do not forget to double-check your details. For instance, if you need the IRS to make a direct deposit, ensure you have the correct bank account information. If you believe that you are prone to making errors with numbers, then the best route would be to hire a tax professional or use tax software. And while talking about tax software, we agree with David Kang’s concept of keepertax.com that individuals prone to mistakes and forgetfulness should take advantage of tax software and applications to help monitor their purchases-related write-offs. That’s because the smallest of errors can prompt tax penalties from the IRS.
If, for instance, you enter financial information and invariably happen to understate or overstate your income, you will hurt your pocket because chances are you will overpay your taxes. Nevertheless, with the solutions above, you can strive to eliminate arithmetic errors and avoid IRS sanctions. This is important more so because most taxpayers still file their returns manually.
Making entries into the wrong fields
Ensure all your tax entries are written or entered where you intend them to be. For instance, you shouldn’t enter the taxable IRA distributions in the line meant for your tax-free IRA rollover. This could be trivial, but the finer details are hard to get right. Fortunately for you, you could use tax software to prevent that.
Ignoring your eligible tax deductions and credits
It is important that you don't get too greedy with your credits and tax deductions. If you happen to claim too many or too few deductions or credits, you will invite the IRS penalties. This isn’t surprising because every year, we see the case of taxpayers claiming for rebates or credits they aren't eligible for. Nonetheless, if you have those you affirm eligibility, then go ahead and take advantage.
Selecting the wrong filing status
Are you aware of the filing status to use? Well, this is problematic for many. And whether you are married, separated, single, or divorced, each status has its filing category. But that doesn't make it easy either. Identifying your right filing status can be confusing.
Getting the filing status wrong will throw your tax numbers off, and you could get a whack of a tax bill eventually. Overall, do not attempt dubious means and use a wrong filing status that you probably don’t qualify for yet in order to bring your tax numbers a notch lower.
Filing Tax Returns: The Key Takeaways:
- Inform the IRS on how to handle your deposit.
- Report your financial information as it is reported to you.
- Use all the write-offs you are eligible for.
- Fill in all your necessary information correctly, starting with your name and social security number.
Beyond the already stated mistakes to watch out for a while doing your taxes, the most important one that people overlook is filing your tax returns early. This tip will help you reduce the risk of tax fraud and make it easy for you to dodge some common filing mistakes people make.
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