When it comes to tax preparation and planning, mistakes are easy to make.
From basic information to possible deductions, a far-reaching range of pitfalls that result in an IRS audit or a missed opportunity to save money.
According to a 2015 report, federal tax laws and regulations have grown to over 10 million words in length. This number will likely continue to grow in the years ahead as America grapples with the aftermath of the Coronavirus pandemic, a year of inflation, and other unseen hurdles ahead.
So, before you start to fill out your annual taxes, keep an eye out for these common mistakes that can hinder your bottom line in the months and years to come.
Don’t Forget the Tax Day Deadline
The tax season officially began on January 23, and the due date for your federal tax return in 2023 is April 18. This is slightly later than previous years, as April 15 falls on a Saturday, and Monday, April 17, is Emancipation Day, a federal holiday.
If you realize you need more time as the deadline inches closer, you can always file a free extension, which will give you until October 15 to file your federal tax return.
Review the Basics
Many taxpayers are on autopilot when they enter basic information such as names, social security numbers, or addresses. However, any misspellings in this essential part of your tax return can raise red flags for the IRS.
In addition, how you file can impact your overall tax return. If you are unmarried, you can file as “single,” but you might receive more financial benefits if you file as head of household. Your eligibility depends on your status.
Additionally, sometimes married couples save money if they file separately rather than jointly. All of these scenarios depend on your financial situation. That is why an expert in tax planning and management can help identify the right overall strategies.
Don’t Automatically Take the Standard Deduction
Taking the standard deduction may save time for tax preparation, but you could also lose money if you don’t take on the heavy lifting of itemizing.
Granted, the standard deduction has nearly doubled since the onset of the Tax Cuts and Jobs Act of 2018, but you’ll never know whether standard deduction or itemizing is more beneficial. It can be helpful to make a detailed comparison before deciding what is best.
Check Your Calculations
The IRS reported that the most common tax mistakes, and miscalculations are one of the most prevalent errors across the board. These math mistakes can range from simple addition and subtraction errors to more complex calculations. So, always double check that the figures throughout all of your tax return forms are accurate.
Review all Your Credits and Deductions
Taxpayers can easily make mistakes regarding commonly utilized credits and deductions like the earned income tax credit. Other credits and deductions include child and dependent care credit, the home office deduction, and many more.
Taxpayers may leave money on the table when it comes to these deductions and credits. This is especially true when it comes to side gigs or jobs, or self-employment.
For example, everything from your monthly utility bills to repairs or remodeling work can likely be deducted if you work from home. However, most taxpayers are concerned that claiming a home office deduction will trigger a tax audit. This is generally not true, so don’t overlook your potential opportunities to save money.
What if You Get Audited?
The above list is just a sample of some items on a lengthy tax return that can be missed or miscalculated. Also, with hundreds if not thousands of data fields to get right, it’s not unusual to make at least one mistake.
However, if these mistakes lead to an audit, it is not the end of the world. Therefore, a selection for an audit does not always suggest there’s a problem. The IRS also utilizes random selection and computer screenings to compare tax returns against “norms” for similar returns – not because they identified a clear issue.
Partner with our Professional Tax Experts and Financial Advisors at Saddock Advisory
Your best bet for avoiding any audit-related headaches is to partner with an experienced tax planning and management team before you file.
Our trusted financial advisors at Saddock Advisory can help you with all your tax preparation and tax planning needs.
Tax laws are constantly changing, and many hurdles can transfer to a loss of income or an IRS audit. Having a professional who can help you navigate these challenges is the safest and most successful way to avoid any mistakes.
