The Top Tax Mistakes to Avoid: A Comprehensive Guide

Taxes can be confusing, but making mistakes when filing your taxes can be even more confusing and costly. In this guide, we’ll dive deeper into each of the top tax mistakes to avoid and provide more tips on how to avoid them.

Filing Late or Not Filing at All

Filing late or not filing at all is one of the most common tax mistakes. If you’re unable to file your taxes on time, you can request an extension of time to file. However, an extension to file does not extend the time to pay any taxes due. If you don’t file and owe taxes, you’ll be subject to a failure-to-file penalty, which is 5% of the unpaid tax for each month or part of a month that your return is late. The maximum penalty is 25% of the unpaid tax. If you file your return more than 60 days late, the minimum penalty is $435 or the balance of the tax due on your return, whichever is smaller.

To avoid this mistake, make sure to file your taxes on time or request an extension if necessary. If you owe taxes, try to pay as much as you can by the deadline to avoid interest charges and penalties.

Failing to Report All Income

Failing to report all of your income is another common tax mistake. You should receive a W-2 form from your employer and a 1099 form if you’re an independent contractor or freelancer. However, you may also have income from other sources, such as rental properties, investments, or side jobs. Failing to report all of your income can result in penalties and interest charges, as well as an audit. The IRS has ways of finding unreported income, so it’s important to report everything.

To avoid this mistake, make sure to report all income, even if you didn’t receive a W-2 or 1099 form. Keep track of all income throughout the year, and be sure to report it accurately on your tax return.

Claiming Ineligible Deductions

Many taxpayers make the mistake of claiming deductions they’re not eligible for. This can include deductions for expenses that aren’t related to your job, such as personal meals or clothing. Make sure to only claim deductions that you’re eligible for, and keep detailed records of your expenses to support your claims.

To avoid this mistake, make sure to read the instructions for each deduction carefully and only claim deductions that you’re eligible for. Keep detailed records of all expenses and keep receipts to support your claims.

Forgetting to Sign and Date Your Return

Forgetting to sign and date your tax return may seem like a small mistake, but it can result in your return being rejected or delayed. If you’re filing a joint return, both spouses must sign and date the return.

To avoid this mistake, make sure to sign and date your return before sending it in. If you’re filing a joint return, make sure both spouses sign and date the return.

Math Errors

Math errors are another common tax mistake that can lead to penalties and interest charges. Double-check all of your calculations and make sure to use the correct figures when filling out your tax return. Using tax preparation software can help you avoid math errors.

To avoid this mistake, use tax preparation software or double-check all calculations to make sure they’re accurate.

Filing the Wrong Forms

There are a variety of tax forms to choose from, and it’s important to make sure you’re using the correct ones. Using the wrong forms can result in delays or even an audit. Make sure to carefully review the instructions for each form before filling it out.

To avoid this mistake, make sure to review the instructions for each form before filling it out. If you’re not sure which form to use, consult a tax professional.

Not Keeping Good Records

Keeping good records is important for accurate tax reporting. You should keep records of all income, expenses, and deductions throughout the year. This can include receipts, bank statements, and invoices. Failing to keep good records can make it difficult to file your taxes accurately and can result in penalties and interest charges.

To avoid this mistake, keep good records throughout the year. Use a system that works for you, whether that’s a physical file system or digital records, and make sure to keep all relevant documents in one place.

Not Taking Advantage of Tax Credits

Tax credits can help lower your tax bill, but many taxpayers fail to take advantage of them. There are a variety of tax credits available, including the Earned Income Tax Credit, Child Tax Credit, and American Opportunity Tax Credit. Make sure to review all available tax credits and see if you qualify.

To avoid this mistake, review all available tax credits and see if you qualify. If you’re not sure, consult a tax professional.

Not Adjusting Your Withholding

Your withholding determines how much tax is taken out of your paycheck throughout the year. If you don’t adjust your withholding, you may end up owing taxes at the end of the year. Conversely, if you over-withhold, you may be giving the government an interest-free loan. Adjust your withholding as needed to ensure that you’re not overpaying or underpaying your taxes.

To avoid this mistake, review your withholding periodically and adjust it as needed. Use the IRS withholding calculator to help determine the correct amount of withholding.

Ignoring Tax Law Changes

Tax laws can change from year to year, and ignoring these changes can lead to mistakes on your tax return. Make sure to review any changes in tax laws and how they may affect your return. This can include changes to deductions, credits, and tax rates.

To avoid this mistake, stay up-to-date on any changes in tax laws and how they may affect your return. Consult a tax professional if you’re not sure how changes may impact you.