You might think that the process of doing your taxes is a drag, but you know what’s worse? Filing tour taxes only to discover that you’ve made a mistake that’s going to cost you big time!
If you do your own taxes, rather than have a tax and accounting company like https://creativetax.io/, do them for you, chances are you will make an error or two over the years, but you can minimize your chances of doing so by knowing what the most common, and costly) mistakes are so you can avoid repeating them yourself…
Filing an illegible return
Surprisingly, one of the biggest mistakes that people make is sending an illegible tax return. If the IRS is unable to decipher your taxpayer ID number, name, or address, then they are simply not able to process your return, and you may be hit with a penalty as a result. This is something that’s going to be less common as more and more people choose to file online, but if you still file the traditional way, it’s important to be mindful that your return is readable.
Selecting the wrong filing status
Another common mistake made by many U.S. taxpayers is choosing the wrong filing status. Your filing status is used to determine a number of things, including tour credit eligibility and deductions. If you do file wrongly, in many cases, you can simply file a second amended return, but this is not possible if you file jointly as a married couple, and you will need to wait until the next tax year before you can change your status in that instance.
Calculating credits and deductions incorrectly
What is and is not acceptable as a tax deduction or credit can be a complicated business to decipher if you aren’t an expert, which means a lot of people get it wrong. Not only that, but not everyone is great at math and miscalculations can happen purely by accident. If this happens, you may end up either overpaying the IRS or being investigated because you haven’t correctly declared your income.
Forgetting to attach 1099-R forms
1099-R forms must be filed in order to claim pensions, annuities, or retirement plans that have been withheld that tax year. You must also file one if you have withdrawn any funds from an IRA in any given tax year. If you fail to do so, you could end up being audited because the 1099-R form will push you up into a higher tax bracket. So, if a visit from the IRS really is your worst nightmare, it would be a good idea to ensure you don’t make this potentially expensive, stressful, and time-consuming mistake.
As you can see, mistakes are easy to make and they could be pretty expensive too. That’s why you should always be very careful when doing your taxes, or even better, have a professional, who really knows what they are doing when it comes to the IRS, take care of them for you!