The old adage remains true today — The only things certain in life are death and taxes. Unfortunately, many people fall victim to common tax mistakes that could otherwise be avoided.
Let’s explore some of the most notable that you should keep an eye out for.
1. Not Filing a Tax Return
This is one of the most common tax mistakes, and it can lead to penalties and interest charges from the IRS. Under most circumstances, you are required to file taxes if you earned income during the previous tax year.
However, this responsibility will differ based on a handful of factors. These include whether or not you are a business owner, how much money you made, etc.
2. Filing Late or Incorrectly
It’s no secret that tax forms are often confusing. Using the wrong form when filing could land you in hot water with the IRS. If you file your tax return late, you may be subject to penalties and interest charges.
In addition, if you file incorrectly, it could result in additional taxes owed or even an audit by the IRS. Under this type of circumstance, you will be required to produce documentation that proves your total income and your income sources.
3. Underreporting Your Income
Taxable income typically includes wages, tips, dividends, and capital gains.
Oftentimes, taxpayers will try to underreport their income in order to reduce the amount of tax they owe. However, this could easily result in you being charged with felony tax evasion. You’ll also be subject to fines and similar financial penalties.
The IRS understands that tax errors happen, though, and not all cases of underreported income are viewed as tax evasion. Still, it’s always in your best interest to maintain honesty when filing.
4. Foregoing Tax Deductions
Tax deductions are a great way to save extra cash during tax season. However, many people fail to take advantage of tax deductions because they either don’t know about them or they’re too intimidated to claim them.
There are a wide variety of tax deductions that you may be eligible for, including those related to mortgage interest, student loan interest, and business expenses. Your applicable deductions will vary depending on the situation you’re in, but you more than likely have a few that you can take advantage of.
If you’re looking to file your taxes as accurately as possible, is highly recommended to get in touch with a tax planning advisor. You can check out this resource by WealthAbility to learn more.
Avoiding These Common Tax Mistakes Is Essential
Otherwise, you run the risk of encountering a large number of issues in the future.
The good news, however, is that avoiding these common tax mistakes is relatively straightforward. Be sure that you keep the above guidelines in mind so that you can navigate obstacles that present themselves.
Looking for more tips that can help you out later on? Check out the rest of our blog for plenty of useful information.