When it comes to tax filing, you just cannot afford to make mistakes. Granted that with a tax code as long as the United States’ and so many different IRS tax forms, tax filing can become a bit overwhelming at times, but going that extra mile will benefit you in the long run.
But worry not, for we’ve got you covered. Here are the top ten mistakes that you should avoid like the plague when filing your tax returns.
Tax filing is a complicated and intricate process. Waiting until the last minute to prepare and file your tax returns would inevitably mean that you’re in for trouble. According to the IRS, almost 20% of taxpayers wait until the last minute, filing their tax returns only a week before the deadline. Postponing your tax filing for the last minute not only increases the chances of errors but also leads to you being penalized by the IRS.
Error in math formulas in the tax forms is one of the major causes why people have to file for amended tax returns. The review process of the IRS is, and hence, any minor errors can cause your form to be rejected. Thankfully, you can avoid this mistake by using tax preparation online tools that can calculate the numbers accurately.
Not Keeping Track Of Your Expenses And Receipts
Often it so happens that people forget to monitor their expenses. This is what hits them hard when the reality of the tax season is looming over their heads. Start making amends by monitoring your spending and holding on to the receipts and any other document that is necessary for your tax return.
Forgetting To Sign
No matter how carefully and accurately you prepare your tax returns, the IRS will not consider it valid until it has been signed and dated by you. If you’re filing a paper form, well and good, however when filing your tax return electronically, you must sign your form using the PIN that the IRS has provided you
Mixing Personal And Business Expenses
Although this may seem like no big deal, this is a huge red flag for tax returns filing. For instance, you cannot declare a personal vacation as a business trip. Such actions may trigger the suspicion of the IRS and lead to an audit. So, it’s best that you separate business and personal matters completely. Also, try to keep separate credit/debit cards for your business and personal expenses. This way, you’ll always be able to differentiate between your expenses.
Not Staying Updated With Tax News And Policies
It is essential to keep up with the new tax reforms, policies, and procedures since they’ll help a great deal during tax seasons. Every year fresh tax deduction choices surface, and hence, monitoring them closely will allow you to take advantage of any particular option that may suit your situation. So, keep tabs on tax news by checking out IRS’ official website regularly.
Improper Knowledge About Tax Forms
Having little or knowledge about the different kinds of tax forms can put you through a lot of trouble. To file your tax returns correctly, first, you need to know which form is apt for you. There are three different types of forms offered by the IRS – 1040, 1040A, and 1040EZ. For instance, if you want to itemize deductions, you have to include a Schedule A from along with the 1040EZ.
Wrong Filing Status
The IRS levies varying rates of income tax and deductions under five different statuses – single; married, filing jointly; married, filing separately; head of household, and qualifying widow(er). Every case is handled differently, for example, married couples who are filing separately will have to declare their individual deductions.
Inadequate Knowledge Of Deductions
When running a business, you’ve got to set your deductions right. For startups in their first year of business, costs such as office space rent, office equipment, etc., cannot be included in deductions until they have made their first sale. Once the sale is made, these costs can be deducted for the next fifteen years. IRS offers a host of options for businesses both more than and less than $50,000, so make it a point to stay updated with the latest IRS deduction laws.
Filing Under The Wrong Business Structure
Tax laws differ for different business entities such as sole proprietorships, corporations, LLCs, and partnerships. For instance, sole proprietors have to report their incomes and expenses to the IRS under Schedule C along with coupled along their income tax returns. On the other hand, corporations are charged with double taxation. Thus, it is vital that you file your tax return according to your business structure.
Now that you are aware of these standard errors make sure you avoid them in the next tax season. For any other help related to tax filing, contact MyTaxFiler today!