When it comes to complicated matters such as filing taxes, we can be thankful that we live in the age of software sophistication. This takes a lot of thinking out of the matter, even catching such flubs as missing social security numbers. However, it still won’t stop you to ask if you’re certain you are maximizing your chances of a healthy tax return. When it comes to filing your taxes, you can be your own best ally in gaining a bigger reward, or your own worst enemy if you don’t know what tax mistakes to avoid. If you plan ahead and brush up on some of the ins and outs, you can take control of your financial well-being. Take a look through the points below to help you swerve past those costly tax mistakes to avoid.
You Know What They Say About Assuming, It Can Also Cost You Money
Don’t assume, research to see what you can itemize and what qualifies for a deduction.
- Grab a copy of the itemized-deduction publication for guidance on which documents you should hold onto throughout the year regarding donations. You could end up with a greater return than expected if you keep track of these things.
- Big tax mistakes to avoid would be not putting in the effort to hunt down all possibilities for a tax deduction. In the case of medical deductions, the floor this year is 10 percent, that’s AGI, not gross income. Save all receipts, co-paid doctor receipts, prescriptions, check the top of your head for the glasses you can never find and remember paying for those, even all the parking you have grumbled about paying for and any travel you may have done. It could all add up to a better return.
- Don’t fall for false promises from a tax preparer. Perhaps one of the biggest tax mistakes to avoid; everyday living expenses and groceries don’t count. There are those who may try to squeeze these in though. Beware, audits are likely to follow and that is not where you want to end up.
Donations and Deductions, Know Your Stuff
- Hold onto your receipts and check the tax guide to see where you fall realistically in the value of your contributions to charity.
- If you have all of the criteria and paperwork to back you up on eligible deductions you don’t have to be afraid of an audit coming to get you. This is another point where putting the time in to learn what is eligible will help in knowing what tax mistakes to avoid.
File Early and Be Thorough
- Don’t put off filing until the last minute. Yes, we say it all the time; “I have got to get on with filing my taxes”…. And then go and do everything but that. Instead of ending up with an unusually clean silverware drawer this time of year, get your paperwork organized. Get yourself a big envelope, write “RECEIPTS” on it and collect them as the months go by so you’re prepared when tax time comes. Keep an eye out for when the new tax software comes out to be caught up on the newest updates.
- Tax filing software usually have the ability to auto-import forms like your W2 as well as investment tax forms. While useful, it is not always fool-proof, especially when it comes to difficult W2 or 1099 forms. Tax mistakes to avoid here is ensuring all numbers are inputted correctly yourself to avoid possibly paying your taxes twice.
- Any big life changes, such as marriage or divorce in the past year will mean you now have a new filing status. A single parent can now become the head of household when filing.
Documentation Dos and Don’ts
- Do report all income, even if you don’t have all documentation. If income comes your way, report it, regardless of documentation. Hold on to all receipts for expenses a crewed so that you don’t overpay taxes.
- Don’t assume tax forms and income reports are correct: Tax laws can change from year to year, and companies are not immune to making mistakes. Check the numbers in the tax forms to see if they match your records.
- Do keep all documents necessary for all deductions as the IRS can query about any deductions. Take advantage of today’s resources and keep an ongoing file placed in cloud storage so they can’t be lost.
Lastly, plan for next year now. In many cases, tax deductions will only work to your advantage during the calendar year. You could miss the boat if you wait until you file.
Watch for costly mistakes or if you’ve ensured you’ve maximized any possible returns. Even if using an accountant, software or filing on your own, these tips will help you keep an eye out for tax mistakes to avoid.