Common Tax Mistakes to Avoid
If you're like most taxpayers who can't afford a CPA, you'll probably have difficulty understanding the complicated tax laws.
However, that's no excuse if you don't comply with the legislation. The onus is on you to learn. The IRS has made information available on their website because it's your right to know what to do regarding your taxes. Here are some of the things you should not do to avoid problems with the Internal Revenue Service.
Failure to File a Return
You can get into serious trouble if you fail to submit your return. The least you can expect the IRS to do is impose a fine. Worse, you could face tax evasion charges. If convicted, you're likely to spend time in prison.
Some countries like Canada have voluntary disclosure programs that allow taxpayers who fail to file returns for previous years to submit them and avoid harsh sentences. You can find more information and help at https://www.canadiantaxamnesty.ca/voluntary-disclosure-program/.
Late Filing of Returns
Don't procrastinate until the last minute to file your taxes. You might forget and end up paying penalties for missing the deadline. You can avoid such an avoidable expense.
Make filing your taxes a priority. The IRS allows you to ask for an extension if you think you can't make it by the set deadline.
Although you can defer submitting your forms, you'll have to pay what you owe by the due date. Otherwise, you'll incur interest for not making prompt payments.
Keep a record of your submission date as evidence in case of a dispute. It's best to send your documents by certified mail. If you're using the postal service, retain the registered receipt in your tax file.
Submitting Incomplete Information
A common yet avoidable mistake is omitting details in your tax return. One way to circumvent this problem is to download your previous form so you don't have to manually enter the annual routine info. Doing so will minimize the possibility of typos and omissions.
Filing Under the Wrong Category
You must ensure that you classify yourself in the correct category to benefit from the different tax rates and deductions.
It's a straightforward choice if you're single. However, it can be complicated when your status changes. For married couples, there's also the option to file jointly or separately.
Your best solution would be to consult the IRS for clarification.
Not Maintaining Records
It's not enough to claim deductions in your return. You'll need to provide documentary evidence to support it. The IRS will disallow your application if there are no bills, receipts, and other relevant documents.
You must report all your income without exception. If you don't declare payments you receive, you risk paying fines, interest, and overdue taxes.
Being Ignorant of Deductions
If you don't claim your tax credits and reliefs, you'll be paying more taxes than necessary. Be sure to do your research and find out your entitlement.
Making Outdated Claims
Ensure that you're aware of current tax laws so you don't file for deductions that are no longer allowed.
Tax Mistakes Are Avoidable
While tax legislation can be tough to grasp, if you avoid these mistakes, you'll save yourself many problems and fines.
However, be sure to exercise due diligence and consult a professional who'll advise you based on your unique circumstances.