7 Mistakes to Avoid This Tax Season
Richard M. Nixon once said, “Make sure you pay your taxes; otherwise you can get in a lot of trouble.” Nixon was right when he said this and he’s still right today. Failure to properly file or pay your taxes can result in serious issues. When you incorrectly file your taxes, you become a likely candidate for an audit, especially if you make a significant amount of money or own your own business. If you completely fail to pay your taxes, you are subject to wage garnishments, bank levies, asset seizures and tax liens, among others IRS actions. To help prevent these types of dealings with the IRS, taxpayers should avoid these 7 common mistakes during tax season.
Mathematical miscalculations are one of the most common mistakes on tax returns. Unfortunately, a significant amount of people are audited due to mathematical errors. If the numbers on your forms are not accurate or they simply don’t add up correctly, the IRS will likely notice.
In order to reduce mathematical errors, use a software system to file your returns or hire an accountant. Use exact numbers on your tax forms and avoid rounding. Be sure to double check everything before submitting your paperwork. Again, if the IRS sees discrepancies in your numbers, you’re a likely candidate for an audit.
2. Computation Errors
Another common error to avoid is computation errors. While these mistakes are similar to mathematical error, computation errors are specific to tax-return entries such as taxable income, withholdings, estimated tax payments and write-offs. The IRS commonly sees computation errors. It can be difficult to figure out your earned income credits, taxable amounts of Social Security benefits and larger deductions. If you’re unsure about how to record something, it’s best to consult with a tax professional. Otherwise, if you make a computation mistake, the IRS will notice and you will likely be contacted, if not audited.
3. Not Reporting Additional Income
You must report all income when filing your taxes. The IRS has a tracking system in place to determine which returns to audit. One of the ways the tracking system flags returns for audit is based on the likelihood of unreported income. Therefore, if you fail to report income or fudge small numbers, you will attract the attention of the IRS.
Be sure to report all income including employee W-2 forms and independent contractor 1099 forms. If you forget to report this income, it could not only lead to an audit but failure to pay taxes on this income could lead to additional penalties and costs. The best way to avoid this is by reporting all of your income to the IRS.
4. Misspelled or Different Names
Another common mistake people make when filing their taxes is misspelling their name or filing under a new name. The IRS will identify you based on your name and your social security number. When your name, your spouse’s name or your children’s name does not match the social security number on file, it will likely slow down the processing of your tax return . Always double check the spelling on your tax forms.
When individuals get married and change their name, this is a common issue. If you don’t alert the Social Security Administration of your name change, the name associated with your SSN will be your maiden name. This can lead to confusion and complications when you try to file taxes under your new last name. Be sure to change your name with the Social Security Administration as soon as possible to avoid any filing issues.
5. Status Errors
What some people don’t realize is that major life changes can impact how you file your taxes. Changes such as marriage, divorce, purchasing a home or having a child can all impact your tax filing status. It is extremely important to select the correct filing status based on your situation. The option you select could make a difference in how much you owe in taxes as well as the amount of your tax refund .
Carefully review each of the status options and select the option that best fits your situation. If you have a life-changing event that would alter your status, contact the IRS. If you don’t, you could file incorrectly, which could lead to an audit or other unnecessary tax penalties.
6. Don’t Miss the Deadline
The most common date to file tax returns is April 15; however, millions of Americans receive extensions allowing them to file in October. Regardless of the date you file, don’t miss the deadline. If you do, you will be subject to penalties and interest. If you fail to file at all, you will not only accumulate back taxes, you could be subject to criminal changes, which may include jail time. The bottom line is to file your taxes on time. However, if you find yourself in a situation with unfiled returns or accumulated back taxes, contact a tax debt relief professional immediately.
7. Avoid Scams
The final piece of advice is to avoid scams. During tax season, people who owe back taxes are often desperate to avoid a financial hit. Unfortunately, scammers are aware of this and they claim to eliminate your tax debt with a fee. Others claim to settle your debt for extremely low costs. Be cautious when working with tax debt professionals. Several tax scams exist so do your research and ask the right questions.
If you’ve made one of the above mistakes or you find yourself in need of tax relief, contact Landmark Tax Group today. We’re here to help when you have IRS tax debt problems or other tax matters that need professional attention. Contact us today at 1-714-382-6780 for a FREE and CONFIDENTIAL consultation.