Filing taxes can be a daunting task for many people. This is especially true if they’re not familiar with the process or have complicated tax situations.
Making mistakes when filing taxes can not only result in penalties and interest charges but also cause unnecessary stress and headaches. That’s why it’s important to know what common mistakes to avoid when filing taxes.
In this article, we’ll discuss eight common mistakes people make when filing taxes and how to avoid them. Read on as we provide you with valuable tips to help make the process smoother and less stressful.
1. Not Filing on Time
One of the biggest mistakes people make when filing taxes is not doing it on time. The tax filing deadline is usually April 15th of every year, and failing to meet this deadline can result in penalties and interest charges.
To avoid this mistake, make sure to mark your calendar and set a reminder a few weeks before the deadline. This is to ensure you have enough time to gather all your documents and file your taxes on time.
If you miss the deadline, you may be able to file for an extension, but you’ll still need to estimate and pay your taxes by the original deadline to avoid penalties and interest charges. It’s always best to file on time and avoid the added stress of dealing with an extension.
2. Math Errors
Math errors are another common mistake when filing taxes. Mistakes such as incorrect calculations or transposing numbers can result in the wrong tax amount owed, which can lead to penalties and interest charges.
To avoid this mistake, double-check all calculations and use a calculator if necessary. Also, make sure to enter all numbers correctly and check for any transposed numbers before submitting your tax return.
If you realize you made a math error on a submitted tax return, you can file an amended return to correct it. However, it’s best to avoid this extra step by taking the time to carefully check your calculations before submitting your tax return.
3. Forgetting to Sign and Date Your Tax Return
Another mistake people make when filing taxes is forgetting to sign and date their tax returns. The IRS requires a signature and date to validate your tax return, and failing to do so can result in penalties and delays in processing your tax return.
To avoid this mistake, make sure to sign and date your tax return before submitting it. If you’re filing a joint tax return with your spouse, both of you must sign and date the return. If you’re filing electronically, you’ll need to use an electronic signature, which can be a PIN, a password, or a digital signature.
4. Forgetting to Include All Income
It’s important to include all income when filing taxes, including income from multiple jobs, freelance work, or investments. Failing to do so can result in penalties and interest charges.
To avoid this mistake, gather all income documents, including W-2s, 1099s, and other tax documents. Make sure to include all income when filing your tax return.
If you’re unsure whether a particular source of income needs to be reported on your tax return, it’s best to consult with a tax professional or use tax preparation software to guide you through the process. Additionally, keeping organized records of all income throughout the year can make tax filing much easier and less stressful.
5. Claiming Incorrect Deductions or Credits
Claiming incorrect tax credits and deductions is another common mistake when filing taxes. Deductions and credits can reduce your taxable income and lower your tax bill, but claiming the wrong ones can result in penalties and interest charges.
Make sure to research and understand which deductions and credits you qualify for before filing your tax return. Some people turn to tax settlement companies for help with claiming deductions and credits. However, it’s important to be cautious when dealing with such companies and do your research to ensure they are reputable and legitimate.
6. Not Keeping Proper Records
Keeping proper records is essential when filing taxes, as it can help you accurately report income and claim deductions and credits. Failing to keep proper records can result in penalties and interest charges.
To avoid this mistake, keep all tax-related documents. These include receipts, invoices, and bank statements. Make sure to have them organized and easily accessible.
In addition to keeping physical copies of your tax-related documents, it’s also a good idea to back up electronic copies of these documents, either on a secure hard drive or a cloud-based storage service. This can help protect your important documents from being lost or damaged.
7. Failing to Report Foreign Accounts
If you have foreign accounts, such as bank accounts or investments, it’s essential to report them when filing taxes. Failing to do so can result in penalties and interest charges.
To avoid this mistake, make sure to report all foreign accounts on your tax return, and consult a professional if necessary. In addition to reporting foreign accounts, it’s also important to report any foreign income earned during the tax year, such as interest or dividends.
8. Not Seeking Professional Help
Finally, not seeking professional help when filing taxes can result in mistakes and missed opportunities for deductions and credits. To avoid this mistake, consider consulting a tax professional, such as a certified public accountant (CPA) or an enrolled agent (EA), who can help you navigate the complex tax laws and regulations.
A tax professional can also provide advice on tax planning strategies to help you minimize your tax liability and maximize your refund. Keep in mind that the cost of hiring a tax professional may be deductible on your tax return as a miscellaneous itemized deduction, subject to certain limitations.
Don’t Let These Mistakes When Filing Taxes Get In Your Way
The filing of taxes is important and can be a stressful time. Being aware of common mistakes when filing taxes and how to avoid them can help to save time, money, and headaches.
Taking these steps can help you to avoid mistakes and get the most out of your filing experience. File your taxes wisely to ensure your financial future.
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