Tax time can be a source of stress for many. While some individuals are worried about owing money, others are eager to get their refunds. Regardless of your tax situation, one thing is certain: no one wants to make a mistake on their tax return. Here, we’ll walk you through some common missteps people make during the personal tax preparation phase and how to sidestep them.
1. Not Reporting All Income
Mistake: Many people forget or intentionally leave out certain sources of income, thinking they won’t get caught. This includes freelance work, rent from properties, or even selling items online.
Solution: Always report every cent you earn. The IRS matches the data they have with what’s on your tax return. Inconsistencies can trigger an audit.
2. Overlooking Deductible Expenses
Mistake: In the rush to file taxes, it’s easy to overlook certain deductions like student loan interest, charitable donations, or even medical expenses.
Solution: Familiarize yourself with common deductions or consider using tax software or consulting with a tax professional.
3. Filing Under the Wrong Status
Mistake: Choosing the wrong filing status, like filing as “Single” when you qualify as “Head of Household,” can affect your tax bracket and the amount you owe or receive.
Solution: Review the requirements for each filing status. If unsure, seek advice from a tax professional.
4. Math Errors
Mistake: Simple math mistakes are surprisingly common, especially for those who file paper returns.
Solution: Double-check your numbers or use tax software that will do the math for you.
5. Not Taking Advantage of Tax-Advantaged Accounts
Mistake: Not contributing to retirement accounts, HSAs, or educational savings accounts can mean you’re missing out on lowering your taxable income.
Solution: Always max out contributions to tax-advantaged accounts when financially feasible.
6. Forgetting About Previous Year’s State Refund
Mistake: If you got a state tax refund last year and itemized your federal deductions, that refund might be taxable this year.
Solution: Review last year’s return and ensure you’re reporting any taxable state refunds.
7. Missing the Deadline
Mistake: Missing the tax filing deadline can result in penalties, even if you are due a refund.
Solution: If you need more time, file an extension, but make sure to pay any estimated taxes owed to avoid penalties.
Conclusion
Avoiding these common mistakes can save you time, stress, and potentially a lot of money. It’s always a good idea to start your tax preparation early, be thorough, and seek guidance if you’re unsure about something. Remember, it’s not just about avoiding penalties; it’s about ensuring you make the most out of your tax return.
Free Tax Consultation with Taxfully: If you’re unsure about your tax situation, reach out for a free tax consultation with Taxfully, and let our experts guide you through.
