Common Tax Mistakes When Filing Taxes
Every year millions of people file taxes and continue to make the same tax mistakes.
The most common tax mistakes while filing taxes are discuss below.
1. Math Error
The number one mistakes taxpayers make are errors in addition and subtraction. The amount of numbers that are being added and subtracted definitely does not help to prevent math mistakes. Sometimes these mistakes cause you to not pay enough in taxes. If this does happen, expect the government to follow up with a bill in the mail. If you overpay, then the excess amount is usually applied towards future taxes you may owe.
Tax Hall Tip: Use a computer tax software to help prevent silly adding and subtracting mistakes.
2. Not Factoring in Dividends and Interest Earnings
Dividends earned from stocks and mutal funds along with interest earned through bank accounts are almost always reported directly to the IRS by the given financial institutions. The IRS usually tries to match your filed tax returns with the reports from the financial institutions and flags any non-matching figures for a possible audit.
Tax Hall Tip: You may get an audit notice for not reporting all earnings, however most of the time, you will not have to suffer any deep penalities unless you do not follow the instructions in the notices.
3. Knowing When You Should Get Married
If you have plans for a December wedding and both partners work, this could result in paying a little more tax than you would have if you both filed as single taxpayer. If both partners are near the upper tax bracket, then holding the wedding off till the following year may be the best way to save.
On the other hand, if only one partner works, getting married may help you reduce your taxes quite a bit.
Tax Hall Tip: Don’t Get Married! Just kidding of course, but make sure you take a look at the differences between getting married at this point or the following year.
4. Not Keeping Receipts
If you plan to deduct for expenses or for any type of deductions, always always keep and save your receipts and checks. It might just come in handy if you happen to be one of the lucky ones picked for an audit. Also, the IRS can go back up to 3 years to open up your taxes to check for any fraud or to question any deductions. After this 3 year window though, the IRS cannot go back and even question any deductions unless they have prove fraud.
Tax Hall Tip: If you get audited, separate those receipts into categories to make it easier on the IRS because the more they believe in what you are doing, they will be easier on you.
5. Not Grouping Deductions
Many people don’t realize that a good amount of deductions are reportable only if you exceed a minimum account. For instance, medical expenses are only deductable if they are over 7.5% of your adjusted gross income. Miscellaneous deductions are allowed if they are at least 2% of your adjusted gross income.
Tax Hall Tip: Try to prepay for your dentist bill or medical insurance for the whole year before Jan 1.
6. Donate to Charity before December 31
A lot of people forget that they need to donate to charity before Dec. 31 if they want to deduct off their taxes for that past year. For items worth over $500, you need to have a receipt of when the item was donated and have it signed off.
Tax Hall Tip: Donating to charity can save you quite a bit off your taxes, so look for any unwanted items and donate away.
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