9 Mistakes to Avoid This Tax Season
9 Mistakes to Avoid This Tax Season
The dreaded (or praised depending on your refund) tax season is upon us including the time to gather all those random receipts piled up in a shoebox and remembering all the possible deductions you can earn. To help with any potential headache filing your taxes can bring, here are nine tax mistakes to get rid of this year as compiled by USAA Federal Savings Bank.
1. Failing to file.
Total avoidance can end up costing you a lot more money than any potential refund you may have qualified for through hefty penalties and interest.
“I see it a lot with college students who work part-time jobs and think they don’t need to file because they make so little,” Lisa Greene-Lewis, certified public accountant and tax professional with TurboTax, said. “But they have actually paid in taxes and may be eligible for certain credits, so they could get a refund.”
Wondering if you still need to file? The IRS has a 12-minute quiz on its website to help you out.
2. Failing to double-check your math.
Writing a 93 instead of a 39 or having 93 + 7 not equaling 100 can trigger red flags to the IRS. According to Amy Wang, CPA and senior technical manager for the American Institute of CPS, e-filing can help detect any potential math errors.
3. Failing to file for an extension.
If you do owe taxes this year, you still have to pay for those taxes by April 15 unless you file for an extension.
“On the extension form, you still need to make a reasonable estimate of what you owe,” Wang said. “You must pay, to the best of your ability, what you owe to avoid receiving penalties.”
4. Failing to think about your taxes at the end of the year
Most people only think about their taxes once their W-2s and 1099s start coming in, but that’s too late to take advantage of some deductions and strategies. Any sell of investments or charitable gifts need to be done by Dec. 31 and retirees with low enough income may be able to take a voluntary distribution from their retirement savings to help with their taxes.
5. Failing to itemize
When filing your taxes you are given the option to choose either the standard deduction or to itemize your expenses. Don’t just automatically select the standard deduction.
“Some people take the easy way out instead of itemizing,” Greene-Lewis says. “You can itemize even if you don’t have home mortgage interest and property taxes. Say if you gave a lot of charitable deductions combined with other expense [for example].”
6. Failing to ask for help
Everyone has unique situations that might prove tricky when filing your taxes. You could be selling a secondary property or helping your aging parents. Don’t ever feel bad for asking for help. It’s better to have your taxes filed properly then incorrectly. If you’re a veteran or active military member, the IRS and the Armed Foreces Tax Council offer free tax help to military members and their families. Click here to find a site near you.
7. Failing to keep good records
Saving your credit card statements or bank statements is not good enough. It’s important to save your receipts. You can get rid of having to shift through hundreds of receipts through tracking apps such as OneReceipt or Shoeboxed. You take a photo of the receipt with your phone, the photo is uploaded and you can then categorize the receipt right then and there.
8. Failing to take tax breaks
According to the IRS, 20 percent of eligible taxpayers don’t claim the Earned Income Tax Credit. There are other tax breaks many don’t know about. “If you’re caring for your parents or have adult kids move back in, you may be able to claim them as a dependent,” Green-Lewis says.
9. Failing to look at the results
Earning a big tax refund one year or writing a check for taxes owed should be a red flag. Double-check your withholdings or how you’re making any estimated payments to make sure you don’t keep repeating the same mistakes over and over, and tax season will be a little more predictable.