Tax season can be stressful. But if you’re able to avoid the common pitfalls, you can save both time and money. The Internal Revenue Service (IRS) reports a large number of simple errors that taxpayers make on their returns. While electronic filers don’t make as many errors, many taxpayers improperly report their income or claim credits and deductions in an improper manner. Using a tax preparer (such as a CPA or enrolled agent) can help you. But even if you work with a professional, you still need to understand how to avoid these common errors.
Here are some of the common mistakes you should avoid while you’re filing your taxes.
#1: Filing Past the Deadline
If you don’t file your return by the due date, the IRS will send you a notice or letter if you owe them a Failure to File Penalty (which will be a percentage of the taxes that you didn’t pay on time). The IRS will calculate the penalty according to how late you file your tax return and the amount of unpaid taxes you owe as of the original due date.
If you don’t file on time, it can also delay any tax refund you may receive, so it literally pays to file your return by the deadline. If you need more time to file, you can always apply for an extension. But even if you can get an extension to file your return, it won’t extend the amount of time you have to pay.
#2: Not Filing Quarterly Estimated Taxes
You need to know if your income type requires you to pay taxes more than once a year. If you’re a freelancer or are self-employed in some other capacity, you don’t have an employer who will automatically withhold taxes from your paycheck. So, you will be required to pay quarterly estimated taxes (in addition to filing an annual return).
You can calculate your estimated quarterly taxes by filling out Form 1040-ES and mailing your payments to the IRS by the deadline for each quarter, which you can find on the form. You can also pay your quarterly estimated taxes online through the IRS tax payment service.
#3: Leaving Out or Messing Up Important Information
When it comes to filing your taxes, you need to make sure you have all the necessary information and it’s accurate. This means double-checking your name, address, Social Security number, and any other important information to avoid delaying the process. If you’re getting a refund and opt for a direct deposit, make sure the tax form has all the correct banking information. It will make sure all the money goes to the right place and you can access it as soon as possible.
You want to make sure you include copies of all the required documents, and be sure to sign your name at the end. The IRS doesn’t process returns that haven’t been signed, so you will need to give them a signed copy after the fact if you miss this important step. Be sure to put a stamp on the envelope, because the U. S. Postal Service won’t deliver a letter or package to the IRS without the right amount of postage.
#4: Not Double-Checking Your Math
Not double-checking your math can delay the processing of your return, but it can also cause you to pay an incorrect amount. This can result in the IRS charging interest on any unpaid taxes. Many people use tax preparation software or hire a professional to help them, because it helps them to avoid these types of penalties.
The IRS also has Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs that offer free basic tax return preparation to qualified individuals (including people with disabilities and with limited English-speaking skills).
#5: Not Taking Advantage of a Potential Tax Break
When you file your taxes, be sure to take advantage of any deductions and other tax breaks that may be available to you. If you have a child or take care of another dependent, you may be able to claim the Child Dependent Care Credit. If you own a small business, you may be able to claim certain purchases as business expenses that are tax-deductible. You also don’t want to claim credits for which you’re not eligible. You might get a bigger tax refund in the beginning, but it can lead to an audit that will cost you more in the long run.
If you’re looking for a CPA who can help you with tax preparation in Corpus Christi, be sure to reach out to Jennings & Hawley.