Paying taxes is never easy known: a small mistake can be a huge ruin. And as a consequence, it is crucial to check all the points of your return twice so that you wouldn’t be charged for costly mistakes.
Math blunders, missing a question or deduction, and simply not computing your score until it’s too late are all common mistakes. And fortunately, there are tactics and tricks you can employ to guard against these pitfalls.
Not Taking Advantage of All Deductions
It’s no wonder then that tax deductions, which can greatly reduce the size of your tax bill or increase the size of your refund, can be the ticket to using the system to your benefit. You just need to learn which deductions you qualify for and figure out if you can itemise your own deductions or need to take the standard deduction. Keeping even minimal records is a lot harder if you don’t have those tax software programs, which allow you to run the numbers and calculate credits and deductions. Lots of people also struggle with whether to take the standard deduction or itemise. And given the 2017 Trump tax changes that nearly doubled up the standard deduction, it can become even more tricky. A financial adviser can help you find a tax strategy that works best for you and your unique goals. Errors of this nature can also stem from a mistake in transferring information into your forms: leaving off a zero somewhere; moving a comma one space over; answering a question about 2002 income on a form asking about 2001 income; forgetting an exclamation mark while reporting a salary; writing down ‘1’ when you meant to record ‘1,000’; entering the wrong date or zip code; or failing to include the signature of a witness. Every form actually includes two sets of numeric entry points with at least one of them unused, as per this fictitious example: Enter checks and any other deposits here: Enter any transfer that does not include a check 1 here:or signing the return here:Enter ‘1’1Checks 2Using checks /US dollars $4,762.43 ChecksChecks782 US dollars $7,820.00Enter ‘2’2TransferBy wire – not checks 3Using wires /foreign currency100 Foreign $70,000.00 watofe8 Foreign ($46,000.00)Enter‘3’3Enter the name of the payee or person you gave the money to 9here:4Sign here: For each of these data entry steps, your failure to follow the directions accurately could result in some money leaving your pocket. Working with tax software or an experienced professional greatly reduces your risk of screwing up.
Inputing Incorrect Personal Information
On Form 1040, the tax return form, there are many blank areas for each individual item to be filled in: names and addresses, Social Security numbers as well as bank accounts. So, not only can you mess up the personal Social Security numbers but you can totally mess up the bank account numbers as well. Delaying your return will be no big deal! They will definitely come back to you for verification of erroneous data. There may be additional penalties to pay aside from the interest due on your taxable balance. You can elect to have your refund deposited directly into your bank account, but only if the number the IRS sends to your bank matches the routing and account numbers on file with the IRS, or else your money could be lost and need to be retrieved through your bank. Like figuring out your tax bracket and whether you’re entitled to deal ingredients, filing your taxes as married with a spouse could throw you into the wrong tax bracket, deprive you of bigger refunds, or – worse – attract the attention of an IRS agent.
Not Reading the Instructions
Tax forms include questions and prompts whose answers might nudge one into or out of thousands of dollars of taxes, or reject an IRS form if the correct boxes aren’t ticked or the correct lines aren’t filled out. Answer the wrong prompt, or even put the wrong information in the wrong box – or just transpose two digits in a number – and you’ll be in for an audit and thousands in penalties. Forms are filled with mistakes such as names not spelled exactly to match up to cards, Social Security numbers not matching up. Mistakes entering the filing status (such as the married-joint return) also results in the wrong amount being refunded to you, or it could mean that you owe more taxes. After correcting any mistakes, checking that all the information on the form is correct is the final step before sending it in. If a refund is owed and people provide their bank account number and routing number, the money will come fast. I review the directions for each section at a time, which cuts down tremendously on mistakes.
Not Taking the Time to Prepare Your Taxes
Whether you use software, pay an advisor or walk into your local CBM for free help, it’s critical that you perform your due diligence before filing. Putting off filing at the last minute could lead to errors that negatively impact your refund or tax liability. Reviewing the personal information you provide before transmitting it can prevent some pricy errors. Names should be correctly spelt, Social Security numbers should match up 100 per cent and any legal name changes should have been reported to the IRS soon after they took place. When it’s all said and done (or, rather, written on), be sure all the forms have your John Hancock. Otherwise, the IRS will reject them, so sign each applicable form!
