As humans, mistakes are inevitable. Although, when you arm yourself with some information, you can avoid mistakes. When you have an error on your tax, it might not trigger a full audit. It, however, does come with the disadvantage of delaying your refund if you are eligible for one.
Yes, preparing taxes is a task the majority of Americans hate. Even at that, you want to take the time to avoid errors. We have listed some common mistakes which you should keep in mind when filing your tax
Get Your Data Right
This is one of the most common tax problems. There are times you might enter the wrong data. This is why you should enter the exact numbers on your W2 form or other tax forms without approximations.
Since Uncle Sam will compare the copies of the forms it received with your tax form, any approximation will raise some eyebrows. As a result, there will be a red flag if you claim $31860 rather than $31864. Avoid the mistake of transposing numbers as well because entering $31,684 will cause issues.
In addition to Math errors, be careful and get your social security numbers right as well, not only yours, your spouse, and dependents. If what you send doesn't match, it will delay your processing.
What if You are Getting a Refund?
Still, about numbers, you want to be sure your bank account information is correct if you requested a direct deposit for your refund.
Even though IRS form 8888 is pretty simple, be sure it's free of errors. You get the opportunities to enter three account numbers and, surprisingly, three opportunities to make a mistake. Making a mistake could make you lose your refund. If you are lucky, the account detail you entered might not exist so that the bank will send the money back to the IRS.
That Extra Income…
Uncle Sam believes that all of your income should be taxed, regardless of the source and whether you got a 1099 form or W2 form. This might amaze many people who had access to extra cash in addition to their income.
Independent contractors will likely be issued a 1099-MISC form if you get a payment of $600 or more. Be sure to have your records as this is not reliable. This will help you know what to claim as April approaches.
When you get any 1099 form, the information will be included somewhere in your return. A tax professional can guide you.
Are You Supposed to Itemize?
One of the most common sources of confusion, which eventually leads to errors for taxpayers is whether to claim the tax credit and deductions. This is not surprising as many rules apply to many tax deductions, while qualifications for some credits are not straightforward.
To claim some deduction, you have to itemize. When you itemize, you are not claiming the standard deduction for your filing status. You might overpay Uncle Sam with this.
Even if the math favors you, there must be proof to support your assertions, especially charitable contributions. Be sure to get familiar with the rules.
Avoid Being Late
Preparing taxes is not particularly an exciting hobby for many people. This might make you keep putting it off and off. Others are simply procrastinators, shifting the tax date till April. And all of a sudden, it's April, and you have not gotten your act together.
As long as you file Form 4868, you can get a six-month extension till 15th Oct to file your tax. This, however, comes with a catch.
In submitting the extension request, you should remit any tax you owe then. This can come as a surprise, especially if your tax return is not completed. There are, however, many resources online that can come to your rescue.
The main thing to do is make payment to Uncle Sam. You will likely end up with interest and penalties on the outstanding amount if you send less, or you didn't send it at all. While sending Uncle Sam more will qualify you for a refund.
Enlist the Services of a Professional
There are some people with complicated financial situations. Your probability of making a mistake will reduce drastically if you enlist the service of a professional.
