During tax season, the IRS receives 168 million tax returns from individuals nationwide. If you’re getting ready to prepare your tax return, you might be worried about making a critical mistake. Worse yet, you could face consequences for omitting vital financial information or underreporting your income.
Knowledge is power, however, and it is possible to successfully make it through tax season. Read on to learn about five common tax problems and how to avoid them!
1. Failing to File by the Deadline
One of the most common tax mistakes is missing the deadline. With some exceptions, the tax deadline typically falls in mid-April. Your employer, investment firms, and other sources of income will send you the necessary tax documents by the start of the year.
If you miss a deadline, you may be subject to penalties if you owe money. Over time, failing to pay those penalties can lead to compounded interest on what you owe. You could end up gouging your budget to pay hundreds or thousands of dollars.
2. Being Disorganized with Documents
As you head into tax season, designate a folder for all documents you’ll need. Not doing this only leads to frustration when you’re desperately trying to find the records or statements you need to file an accurate return.
Along the same lines, make notes about any changes to IRS policies or benefits that you can keep in your folder. Know what changes to the tax code are in place so you don’t run into IRS tax problems.
3. Making Mathematical Errors
When you work on your taxes, it pays to check your math before submitting. While many tax filing services will add the numbers for you, that’s not the case when you’re working independently.
Tally your deductions and add up your sources of income carefully. Know what the income tax rates are. And ask someone else to look over your documents before filing.
4. Selecting the Wrong Status
With tax filing, you should familiarize yourself with the vocabulary that can impact your tax filing status. For instance, know what it means to file as a single person or a married person filing jointly.
Choosing the wrong status could deprive you of some tax breaks. If you’re a couple, it usually pays to file jointly.
5. Not Reserving Funds to Pay Taxes
Finally, make sure you have enough money set aside to pay taxes. Especially if you haven’t withheld enough or have capital gains taxes, you’ll need to be prepared to pay money. Don’t let this situation surprise you, as it could set you back by thousands of dollars.
If you are blindsided by a bill, don’t panic. Visit taxreliefprofessional.com to learn more about ways you can find tax relief. You may be able to seek out payment plans or find other pathways to relief.
Avoid Common Tax Problems
Tax problems don’t have to define your experience. Stay organized as tax documents arrive in the mail, and make sure to file by the deadline. Keep money set aside for payments and proofread your tax return before submitting it.
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