Filing taxes in an ordinary year can be confusing, stressful, challenging, and it makes you prone to making mistakes. Add a pandemic-riddled year, and all the economic fallout resulting from the lockdowns and the changing tax landscape can make anyone want to pull their hair out.
Many taxpayers are in desperate need of stimulus checks and tax refunds. Others who had an excellent financial year during the pandemic are struggling with abnormally high tax bills. With so many new things thrown into the mix in an already confusing situation, anyone can make mistakes. Unfortunately, making a mistake while doing your taxes could result in the loss of potential tax savings you could have had or tax penalties for things you might have missed.
We have written this post as a guide to help you identify some of the most annoying tax mistakes to avoid this year so that you can make matters relatively easier for you.
5 Annoying Tax Mistakes To Avoid This Year
There are several potential tax mistakes that you can make. Unfortunately, falling into any of these traps could result in you losing a lot of money you could have kept or even increase your chances of getting audited by the Internal Revenue Services (IRS).
We will list down some of the most annoying tax mistakes to avoid so that you can make more well-informed decisions during the next tax season.
1. Mistakes while writing down your Social Security number
Typos while writing down your Social Security number are far too common mistakes that people make during tax season. The IRS receives a good chunk of tax returns each year that come with mistyped Social Security numbers, and some people even forget about it entirely.
Ideally, you should remember your Social Security number by heart. But, of course, it still leaves room for you to make mistakes while noting down the numbers for your dependents or spouse. Make sure that you double and triple check your Social Security number before you sign your tax return and file it.
2. Not including all your income for the year
If you received tax forms from your employer, the IRS should receive a copy of those forms as well. Remember to include all your W-2 forms, 1099 forms, as well as forms from investment accounts and bank accounts. Failing to declare all your income for the year is the worst thing you can do if you are trying to avoid making the IRS think that you have something to hide.
Many people also received income through unemployment or stimulus checks. Depending on your overall income for the year, you may also need to include money you received while unemployed because that counts as part of your taxable income, minus the first $10,200 of benefits that are tax-free for the 2020 financial year.
3. Missing eligible tax credits and deductions
There is a popular myth among taxpayers that claiming too many tax deductions or tax breaks is a quick way to trigger a tax audit. The IRS will never concern itself with conducting an audit on someone who is claiming tax credits and deductions that they are eligible for.
The thing is, you need to make sure that you claim all the right tax deductions and avoid overdoing it by trying to claim too many of them. Make sure you study and understand all the tax credits that you can qualify for and claim them accordingly during the next tax season.
4. Not signing and dating your tax return
Another annoying tax mistake to avoid this year is forgetting to sign and date your tax return. It might seem like a ridiculous mistake to make since it is unlikely for someone to forget to sign and date their tax return. Suppose that you do submit your tax return without these crucial details. The IRS will not consider that you even filed your tax return at all.
If you realize your mistake late, you could be stuck with paying interest, penalties and get into all kinds of trouble. You should also know that the IRS has been particularly swamped as well due to the pandemic. Not signing and putting a date on your tax returns could result in you being alerted about the mistake far too late. It can delay any tax refund you might have been owed and add the hassle of penalties or late fees.
5. Not filing your taxes at all
Many people find themselves overwhelmed by tax preparation season. If you need more time to sort everything out and want to file your taxes late, you should request an extension well in advance. It is understandable that taxes are not the highest priority of things you love doing, but taxes are inevitable – even if you file them late.
Failing to request an extension on your tax return could be costly for you. It often results in additional costs by the time you are ready to file. Filing for an extension on your tax return does not exempt you from having to pay any taxes you owe on the existing due date. It only gives you more time to sort everything out and file your tax return.
Using Professional Help To Avoid Tax Mistakes
Preparing your tax return can be an unpleasant experience itself. However, if you make any of these annoying mistakes, things only feel a lot worse. Some tax mistakes might put a hold on your tax refund until things get sorted out. Other tax mistakes could lead to you paying more taxes than you should. The worst-case scenario is doing something so horribly wrong that the IRS comes knocking for a full-fledged audit. It is rare, but it can happen.
Sometimes, it pays to pay a professional, especially when it comes to tax season. Consider enlisting the help of a professional to complete your tax return for you, especially if your financial situation is complex. Working with professionals who earn a living off of helping individuals and businesses with their taxes could mean a lot of potential savings and minimized headaches when the next tax season arrives.
Polston Tax is a firm licensed to practice in all 50 states as tax attorneys. With hundreds of professionals in their ranks specializing in all areas of the tax industry, you can rely on their team to provide you the help you need with great effect. The right tax solution providers who are skilled in dealing with complex tax issues can help you maximize your tax savings while making sure that everything goes through clean.