Do you know that about 75.1 million U.S taxpayers didn’t pay any taxes after credits and deductions in the year 2020?
Filing tax returns is a rite of passage that happens annually and one that presents challenges to most taxpayers. It’s even worse now that there are newly added deductions and exemptions due to the pandemic.
It’s no lie, taxes are complicated, and people make mistakes. However, through research and preparation, you can avoid common mistakes.
Read on for our comprehensive guide on six tax return filing mistakes and how to avoid them.
1. Wrong Information
One of the most common mistakes people make is submitting the wrong information. This includes entering the wrong address, social security number, and income figures.
Also, indicating the wrong routing number and bank account can impact your tax return. Avoid this mistake by double-checking each form before sending them in.
2. Missing Information
Missing information is as bad as having the wrong information. It makes your tax returns impossible to process. This may result in delays and even an audit.
Ensure you have filled everything before sending in your tax return to avoid this mistake. You are also required to attach your W-2s and 1099 forms to act as proof of income.
Failure to do so gives the IRS grounds to conduct paper audits.
3. Failure to Indicate International Assets and Income
Owning international assets provides financial stability and might work wonders for your business. However, failure to report these assets to IRS is a mistake that can interrupt your financial stability.
Typically, you should report any international assets exceeding $10,000 to the IRS. Be smart, fill out the treasury form 90-22.1 or the IRS form 8938 to avoid penalties.
Remember, the obligation to report international assets also extends to those with signature authority.
4. The Last-Minute Rush
Procrastination is a common issue among taxpayers. Don’t wait until April 15th to file your returns. Avoid the last-minute rush as you are more likely to make mistakes.
It’s even worse when you miss the deadline. You have to pay interest on the tax you owe and penalties. Also, depending on your case, IRS may close your business.
Ensure you file your income tax return before the tax return due date to avoid such risks.
5. Mistakes in Figuring Deductions and Tax Credits
Various deductions and tax credits are available to taxpayers, and figuring the right ones can be overwhelming. At times, it may appear like you are eligible for a deduction, but in the real sense, you are not.
Consult a tax lawyer near you to be certain about deductions and tax credits.
6. Healthcare Reporting Errors
Due to the many health reporting requirements, there are bound to be errors. The most common errors include failure to reconcile advance payment of tax credit and failure to claim exemptions. Be safe; read through the requirements to evade these errors.
The Bottom Line on Tax Return Filing Mistakes and How to Avoid Them
Now that you know the common tax return filing mistakes avoid making them by planning ahead of time. Have your social security number, W-2s, and 1099 forms in order before the deadline.
Again, slow down as most mistakes happen because taxpayers rush to get their returns done.
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