Tax season began on January 28th this year, and many of us have already started the process of gathering the necessary information to file our returns. We may pay taxes every year, but that does not mean it is a simple process. Did you know that making small errors while filing can add up to costly mistakes? Complying with tax rules is important, but to help you make sure you are not losing out on the valuable deductions you are entitled to, let us share a few common tax mistakes to avoid this year.
Failing to claim deductions and credits you are eligible for can result in a tax bill amounting to thousands of dollars. Similarly, claiming deductions and credits that you are not entitled to can cause the IRS to perform an audit on your particular case. If the IRS finds that you have been claiming deductions you are not eligible for, the agency can require you to pay back taxes, as well as, interest and other penalties.
When filing your taxes, selecting which status you are filing under is often one of the first questions asked. This question may seem simple, but you may not know that by choosing the wrong status to file under, you could underpay or overpay your taxes. These are particularly costly mistakes that can be easily avoided. If you file as married filing separately, instead of filing jointly, for example, you cannot claim the earned income tax credit, and you are excluded from being eligible for certain deductions like the student loan interest deduction. To avoid choosing the wrong filing status, do some research on the eligibility requirements for each to ensure you are not underpaying or overpaying this year.
By January 31st of each year, employers are required to send you your W-2 and 1099 forms to be used when filing taxes. You need these important tax documents when filing taxes in order to accurately report your income and claim any deductions or credits you are entitled to. If you misplace these documents or throw them away, you run the risk of not properly reporting your taxable income to the IRS. Just as you receive these tax documents from your employer, so does the IRS. If you do not report all of your income, you can face criminal prosecution or a civil lawsuit to collect taxes on any undeclared income.
Filing taxes can be a complicated process, so we encourage you to hire an experienced CPA to help guide you through the steps. It is easier to seek advice than to miss out on thousands of dollars in deductions and credits or to go through an IRS audit. Depending on the support of a professional can help you avoid making unnecessary and costly mistakes when filing your taxes.
Remember that April 15th is fast approaching. Did this article raise any questions for you? Do you need the assistance of an experienced CPA and Tax Law attorney? Do not hesitate to get in touch with our office so we can help you with your tax-related needs.