Handling taxes is one of the most stressful parts of the year for many people. The tax code has a lot of complexity, so many people aren’t sure if they are doing things right. Reports show that 25% of people are worried about making mistakes and getting audited by the IRS.
You can’t afford to make mistakes when filing taxes and end up with a hefty fee once the IRS processes your returns. Avoid the eight errors when filing taxes below to do things correctly.
1. Doing the Math Wrong
One of the most common mistakes people make when doing taxes is math. It’s easy to make minor errors when calculating things and filling out boxes. Why do this when you have software that makes things much easier?
Modern tax filing tools allow you to avoid making math mistakes. You can import your transactions to calculate your deductions, income, and much more. Letting a computer do the work will prevent simple errors and give you an accurate return.
2. Bad Information
Another mistake people make when filing taxes that result in a rejection is bad information. This can be the wrong name, social security number, address, and other personal details.
The government has records that tell them who you are, so putting the incorrect details on your tax forms will raise a red flag. This can result in a rejected return and the need to file again. You can face many problems if this happens if you file at the last minute, so double-check all your personal information to make sure it’s correct.
3. Not Reporting Side Income
It’s not uncommon for people to have several sources of income these days. They freelance, do gig work, and take temp jobs. Every one of those income sources is taxable.
Make sure you report every cent you make if you do this. Companies are also required to report income paid to individuals after a certain point, so the government will likely have a record of this and know if you don’t report the earnings you receive on the side.
If you owe too much, you may need to get on a tax repayment plan if you don’t have the money. Check out the government’s tax settlement options to see what’s available.
4. Skipping Deductions
You want to maximize your return as much as possible at the end of the year. You’ll usually get a return because of the standard deduction. However, you can also include other items in your deductions that will further increase your return.
These include student loan interest, property taxes, car registration, and other common expenses. If you do a job on the side, you can also deduct any expense related to that job. These are things like your internet connection, fuel, and phone.
These deductions will reduce your net income and result in more money coming in at the end of the year.
5. Picking the Wrong Filing Status
The government wants to know if you’re single or married when you file taxes. This information is vital to determine what taxes you owe and anything you need to get in your return.
Make sure this information is accurate on the tax form. It’s not uncommon for some people to change their status to try and lower their tax burden.
However, government employees look at these changes — and if you get caught, you can get you in trouble. You can face significant fines, and at worse, be charged for fraud.
6. Forgetting to Sign
Forgetting to sign your tax documents isn’t usually a problem if you eFile or use tax software. The software handles the signing process and won’t let you submit without that information. Your signature is included, so you won’t need to worry about forgetting it.
But some people still do their taxes by hand. When doing things this way, you must sign your tax forms yourself. Don’t forget to sign on the dotted line to make your tax return official.
7. Using the Wrong Deposit Information
In most situations, you will get a refund on your tax return. You work a job like most people, so you pay more in taxes during the year and get a return from your standard deduction.
You need to let the government know where to send that money. The IRS can take your bank account information and deposit your refund directly there. Make sure this information is correct to get the refund you’re owed.
8. Missing the Filing Deadline
You can’t just file taxes whenever you want during the year. The government wants everyone done by a specific date. If you miss that deadline, you’ll face problems.
It’s a bigger deal not to file than it is not to pay. Not filing will result in stiff penalties and cost you even more money.
If you don’t have the money to pay, make sure you still file. You can work out a way to pay what you owe over time if you make an honest effort. Just pay what you can before the deadline to avoid added interest.
Don’t Make Common Errors When Filing Taxes
Taxes are one thing you don’t want to get wrong. A single mistake can result in you owing money to the government, and if you don’t know and neglect to give them the money they are owed, you’ll end up on the hook for added penalties and interest in the future.
But you can avoid problems if you learn common errors when filing taxes and avoid them. Now that you’ve read the information above, you should be better prepared to handle taxes properly.
Do you want to learn more about managing finances properly? Check out more financial posts on the blog.
