Depending on who you ask, filing taxes can be anywhere between an annoying chore and a nightmare. But then, wherever you stand on the spectrum, you’ll agree that you should avoid mistakes on your forms at all costs. Nobody wants problems with the IRS.
To keep you out of trouble, here are four critical mistakes you can make while filing your taxes and how to avoid them.
1. Forfeit your refund
You may be thinking, “Nobody in their right mind would forfeit a refund from the IRS.” Unfortunately, you’d be wrong because people do this every year. Two significant things can cause you to forfeit your refund, and they include owing taxes and not filing your taxes on time or at all.
The solution is to file your taxes on time and pay up when due. If you’re currently unable to pay what you owe, you may reach an arrangement with the IRS. But then, that’s if you’ve been up to date on your taxes in the past.
You’re responsible for knowing all the refunds and deductions you qualify for because the IRS won’t inform you.
2. Use the wrong filing status
There are five filing options – single, married joint-filing, married separate filing, qualifying widow/widower with dependent child, and household. Your filing status is relatively straightforward, and it’s crucial to choose it correctly.
Some of these options have more perks than others. For example, filing joint offers the most savings for married couples. Filing under the wrong status can incur penalties like additional tax owed plus interest. It usually takes about a month for your incorrect filing to be flagged, after which you’ll receive a notice from the IRS.
You can either take the penalty or engage in an audit to prove that you’re right and the IRS is wrong. Unless you have a legitimate claim, it’s simply better to take the penalty.
Tax season is the same time every year. After you miss the first few deadlines, it stops being forgetful, and it becomes full-fledged procrastination. Procrastinating can lead to errors in your reports that you’d otherwise catch.
The IRS sees all kinds of mistakes, from miscalculations to name misspellings, missed signatures, and even filing under the wrong status. As humans, it’s common to make mistakes under pressure and impending deadlines. Avoid mistakes by filing on time.
Here are some simple, but useful tips to help you stop procrastinating your tax filing.
Choose an accountability partner. You can file your taxes together.
Create your own deadline weeks ahead of the IRS’. That way, you’ll have lots of extra time.
Break down the task into smaller chunks. Simplifying the filing process makes it less imposing.
4. Hire a professional when you can do it yourself
Tax experts are very helpful in situations when you have complex issues, like being audited. For most people, it isn’t needed to hire a professional to get through tax season. You can even use free online tools, like tax calculators and the IRS’ free file software.
There are also blogs and websites dedicated to educating people about the tax filing process. An excellent place to start is small business taxes for dummies. It highlights the various forms you’ll need, as well as helpful tips on maximizing tax deductions.