Tax season is slowly approaching, and no one wants to get hit with any penalties. By finding the tax mistakes that you can avoid in the 2020 season, you can feel more prepared and confident. No one wants to end up owing money, but there are some huge mistakes that can cost you more in the long run. By avoiding these five tax mistakes, you can be confident in your return when you submit.
1. Don’t Wait To File Until The Last Minute
When you file a late return, there are penalties and fees that can be accrued if you owe money to the IRS. If you are not sure you can get your tax return finished and submitted by the 15 April deadline, go ahead and file for an extension. This will help protect you in a late filing.
2. Be Sure To File If You Make More Than The Standard Deduction
Knowing what the standard deductions are can save you a lot of grief. This will differ for those who are single or married, if you are the head of household, or if you are married and filing jointly. Knowing what these baseline figures are can help to determine IF you need to file.
3. Do NOT Hide Any Income
We cannot stress this one enough! If you are getting paid for some things under the table, accepting cash instead of trackable income, this still has to be reported. There are instances where some income does not have to be claimed, such as some military benefits, but your tax accountant can help you determine these. If you hide income and are found out, the penalties can be very severe. In addition to having to pay late fees for an amended return, interest will be tacked onto that fee, which will drastically raise the amount you owe.
4. To Trash or Keep Your Documents
When in doubt, hold onto everything. When it comes to documents that you are using for your returns, such as write-offs, W-2s, 1099s, and donation slips, keep it all! A good rule of thumb to follow is to keep everything for at least five years. This way, in case an issue arises, or amendments have to be made, you have the documents to back up your return. Without these documents, you could incur a penalty if there are questions about your return. It is better to be over-prepared, rather than not having your documents together.
5. Be Sure to Claim All Eligible Deductions and Credits
Each year, many Americans leave money on the table that they could claim. Knowing what you are able to deduct, such as childcare credits and education, can help to ensure that you are getting the maximum return. These credits and deductions could be the difference in getting a return and owing money when you file. If you are in doubt of the available deductions and credits, the tax professional that you are using can help to determine what you can and cannot claim.
Tax season should not be a stressful time. Being prepared and informed can keep you from making the five tax mistakes that lead to a stressful 2020 filing season! If you have any questions, we have the answers! Please reach out, either online or over the phone, so that we can help you!