Bypass These Tax Blunders
You tear open the letter marked "Internal Revenue Service" wondering whether it contains an unexpected refund or perhaps a friendly thank you note for filing on time. To your dismay, you find that because of a mistake with your tax return, you actually owe hundreds of dollars more than you projected. Your heart sinks as you think of all the sacrifices you will have to make to pay the extra money.
To avoid this scenario, it's important to exercise caution when filling out your taxes to avoid a boo-boo that will really sting later.
Getting the Credits and Deductions Wrong
The federal tax code these days is right around 74,000 pages. Even if you consider yourself an old hand when it comes to tax prep, there are bound to be breaks and rules you don't know about. Whether it comes from a software program or from a live human tax professional, it makes sense to get help when you have taxes that could get complicated. That's especially true if you have your own business or make money from a side-gig.
Making Math Gaffes
Are you a pencil and paper kind of person? If so, you need to be especially careful with your calculations at tax time. A tiny mistake in your numbers could mean a huge problem later. Double- and triple-check your data and don't be afraid to have another family member take a look at it to proof your work. Also consider filing for free online at www.irs.gov to avoid any goof-ups.
Using Stale Personal Information
If you've been doing your own taxes for a while now, it's easy to get in the habit of just carrying over your data from the previous year's return. But if you've had a child or changed your marital status in the past year and forget to include this information on your return, you risk costing yourself quite a bit of money.
It sounds basic, but you'd be surprised how often people forget to sign on the dotted line. Remember too that if you are married and filing jointly, you both need to sign. While you're at it, add "Double-check Social Security Number(s)" and "Remember to include payment" to your pre-finalization checklist. You don't want to have a delay and the penalties and/or interest that can come with it.
Overlooking Charitable Giving
If you're like most people, you give multiple times per year to different charities. However, when it comes time to do your taxes, you may have forgotten more than a few of these. Get in the habit of tracking your charitable giving, whether it's by keeping receipts in a folder or scanning them and storing them electronically.
If you're planning on not filing because you aren't required to because of a low income level, be aware that doing so could mean missing out on an earned income credit. This could literally take money out of your pocket. On the other hand, if you're avoiding sending in your tax forms because you owe more than you can pay, be aware that you are only making things worse for yourself by not filing. Contact the IRS about an installment agreement or an extension so you can come up with the funds over time.
If you've ever dealt with the situation described in the first paragraph, you know how upsetting and frustrating it can be to get that kind of letter. However, by following the above advice and getting help when necessary, you can put yourself in much better position to only get happy communications from the tax folks.