Are you worried about personal tax mistakes? Then you need to hire a tax specialist.
Making mistakes on your personal taxes is surprisingly common. In fact, countless people make the same mistakes every year. Although they’re common, these mistakes can result in serious consequences, like an audit from the IRS.
To avoid this situation, you need an experienced tax specialist on your side. In this guide, we’ll show you some of the most typical tax mistakes that a tax specialist can help you avoid. Keep reading to find out what they are!
1. Using an Incorrect Filing Status
There are five main ways to file your taxes: single, married filing separately, married filing jointly, head of household, or qualifying widow(er) with a dependent child.
Each of these filing statuses has a specific meaning. You can’t just pick the one that sounds the best – you need to understand exactly what each one means, and choose the status that correctly fits you.
For example, if you’re a single woman who receives child support, did you know that you can often qualify as the head of household? If you have that status and you’re still filing as single, you’re losing money.
If you’ve just recently gotten married or gotten divorced, you’re probably prone to using the wrong filing status. This can cause many issues with your return, including causing underpaid or overpaid taxes.
Keep in mind that even if you’re no longer sharing a house with your former partner, you might still be considered married for tax purposes. Some states have legal separation that can be counted as divorce for your taxes.
But in states that don’t offer that option, if you were legally married at the end of the year, you have to file as a married person.
2. Filing Late to Avoid Payment
If you owe money on your taxes that you can’t pay, filing late is not the right way to handle it.
Sometimes, people may think that the best course of action is waiting to file until they can make the payment. Or, they might become so overwhelmed by the thought of not being able to afford the payment that they don’t file at all.
Neither one of these is a good choice. When you file late, you’re actually making your money problems worse, not better.
The IRS can impose some hefty penalties and fines on those who don’t file on time, especially when you’re the one that owes money. Most of the time, the penalty for filing late is 5 percent of what you owe for each month that you don’t file.
The penalty for paying late is usually .5 percent of what you owe for each month you don’t pay. That’s not counting interest or other penalties that the state might impose.
When you file an extension, you get more time to file, but not more time to pay. No matter what, you have to pay the government what you owe on or before the day taxes are due.
However, if you file early, you don’t necessarily have to pay right away. It’s often a good idea to get the filing out of the way early and leave yourself more time to navigate payment.
3. Claiming Incorrect Dependents
Do you know who’s really a dependant according to the IRS?
The rules governing dependent status can be confusing. However, no matter what, two different people can never claim the same person as a dependent.
This is often a mistake made by divorced couples who both try to claim their child as a dependent. Other times, neither parent claims the child as a dependent, and both miss out on the tax deduction.
Many parents also mess up the dependent situation when their kids leave for college. The parents might think that once the kid is in college, they no longer qualify as a dependent. However, that’s not always the case.
This can lead to the child claiming themselves as a dependent and getting a refund that wasn’t actually meant for them. Meanwhile, the parents will get a large bill on their taxes.
4. Making Bad Assumptions
Many people keep using the same version of their tax software for years on end. However, just because it worked before doesn’t mean it will work this year.
If you got married, had a baby, or bought a house, your tax situation is now more complicated. This means you can’t do things the same way you always have.
If you don’t change your tax software along with your life changes, you’re missing out on many deductions and opportunities to do your taxes better.
It’s also dangerous to assume that tax risks are always okay. Some people keep making the same mistakes year after year, thinking that the IRS won’t notice. However, if you don’t do your taxes carefully each year, this could be the year that you get audited.
It often takes the IRS years to catch up on audits. They might not even have checked all your past years yet, which could be why you haven’t heard anything. If you do hear from the IRS, you could end up having to hire a tax specialist to help you.
5. Making Small Errors
Even seemingly minor errors on your taxes can have big consequences.
For example, if you write your Social Security number wrong, this can cause a huge issue for the IRS.
Minor math errors can also cause major issues. A lot of times, the system will just send you an automated notice to let you know that clarification is needed. However, these kinds of errors can also flag you for an audit.
6. Omitted Income
One of the worse things you can do is leave off some income from your taxes when you file, even if it’s a small amount.
The IRS will match up what you submit with the forms submitted by your employer, financial institutions, and other organizations. If they don’t match up, you could be audited.
Looking for Advice From a Tax Specialist?
The good news is that an experienced tax specialist can help you avoid all these problems.
Not sure what to do if the IRS does find an issue with your taxes? Check out our professional advice here.