Avoid These 5 Common Tax Filing Mistakes That Can Get You In Tax Trouble
Whether you file the simple 1040EZ or a complex 1040 and a raft of schedules, making a mistake on your tax form could lead to big tax trouble. Something as simple as a math error or unsigned form could invite extra attention from the IRS.
The tax agency sees those mistakes every year, and IRS representatives warn taxpayers to be careful when filling out their forms. Even if you think you have everything filled out perfectly, it never hurts to double-check and look for these common tax day errors.
#1 - Assuming Your Tax Pro Prepared Your Taxes Properly
Blindly trusting your accountant or tax preparer to file your taxes correctly can be costly. Of course you want to assume they do a great job, and most tax professionals do, but letting them file without your thorough review is a mistake.
We resolve back tax problems for people, and often what gets people in trouble is a simple mistake; like forgetting to report income, missing deductions, or taking too many deductions.
These are sometimes honest mistakes that if not caught early, can trigger red flags and have the IRS sending you letters of balances due.
No one knows your financial situation better than you do so it’s important you double check your return so you’re not blindsided with an unwanted surprise.
#2 - Waiting Until the Last Minute
Filing taxes is stressful enough. You do not need to make things worse by waiting until midnight on April 15 to get your return in the mail. Give yourself plenty of time to gather all the necessary documents and complete your return.
Keep in mind that unexpected problems could interfere with your last-minute tax filing plans. Getting your taxes done early is the only way to protect yourself from unforeseen circumstances that can delay your tax filing.
#3 - Failing to File on Time
If you cannot file your return on time, you can ask for an extension by filling out a single form. Even if your documents are in disarray, there is no excuse for not filing on time. Filing an extension gives you six more months to get everything in order and complete your return.
Keep in mind that you will still need to estimate the tax you owe and make your payment, even if you file an extension. Filing an extension extends the amount of time you have to get your return to the IRS, but it does not provide a reprieve from your tax debt. If you wait to make your tax payment, you will get hit with penalties and interest.
#4 - Not Making a Backup or Keeping Good Records
Making backup copies of your tax returns, income documents and schedules is an essential part of tax planning and preparation. Set up a folder or file box and use it to store your tax documents as they come in, and then scan each one before you put it away.
Once you have completed your return, be sure to make copies of every document, including your W-2 form and tax schedules, before sending the return to the IRS. If you file electronically, be sure to save a PDF copy of your return before completing the final step. Save all of those electronic tax documents on your computer or cloud storage device. Ordering a lost copy of a past year's return from the IRS is time-consuming and expensive. You can save time and money by making your own backup copies. If the IRS audits you or requests more information from you, all your records will be extremely helpful in the process.
#5 - Ignoring Letters From The IRS After You File Your Taxes.
Sometimes the IRS will send follow up correspondence, especially if you owe money to the IRS. It can be easy to ignore the first few letters. Even if you have the intention of paying your taxes soon you should still take action and either get on an installment agreement or reach out to a tax relief firm if your financial situation requires it.
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