April 4, 2023

Top 10 Tax Mistakes and How to Avoid Them

Tax season can be a stressful time for many people. With the myriad of forms, deductions, and ever-changing tax laws, it’s easy to make mistakes that could cost you in the form of penalties, interest, or even audits. To help you navigate this tricky time, we’ve compiled a list of the top 10 most common tax mistakes and how to avoid them. Keep these tips in mind as you prepare your taxes to save time, stress, and money.

Filing late or not at all

One of the most common mistakes taxpayers make is missing the tax filing deadline or not filing a return at all. To avoid late fees and potential penalties, make sure to file your taxes on or before the deadline. If you need more time, consider filing for an extension, but remember that an extension only grants you extra time to file, not to pay your taxes. You’ll still need to estimate and pay any taxes owed by the original deadline.

Incorrectly reporting income

Under-reporting or over-reporting your income can lead to discrepancies on your tax return, which can trigger an audit. To avoid this, carefully review all your income sources, including W-2s, 1099s, and other financial statements, before filing your taxes. If you find any discrepancies, contact the issuer to correct them before filing your return.

Forgetting deductions and credits

Many taxpayers miss out on valuable deductions and credits simply because they don’t know they qualify. Before filing your taxes, do some research on the deductions and credits available to you. If you’re unsure, consult a tax professional who can help you identify and claim these valuable tax savings opportunities.

Not keeping proper records

Failing to keep accurate records of your expenses and deductions can make it challenging to claim them on your tax return. Maintain organized records throughout the year to ensure you have the necessary documentation to back up your deductions and credits. This will not only help you file your taxes more accurately but also prepare you in the event of an audit.

Math errors

Math errors are a common reason for tax return adjustments and can lead to underpayment or overpayment of taxes. Double-check all calculations and ensure the information entered on your return is accurate. Using tax preparation software can also help reduce math errors.

Choosing the wrong filing status

Your filing status determines your tax bracket, standard deduction, and eligibility for certain credits and deductions. Filing under the incorrect status can result in overpayment or underpayment of taxes. Be sure to review the IRS guidelines for each filing status to determine which one is most appropriate for your situation.

Missing or incorrect Social Security numbers

Incorrect or missing Social Security numbers can result in a delayed or rejected tax return. Double-check all Social Security numbers on your return to ensure they are accurate and properly formatted.

Not double-checking direct deposit information

Direct deposit is a convenient way to receive your tax refund, but entering incorrect account information can delay or even misdirect your payment. Carefully review your account number and routing number before submitting your return to ensure your refund ends up in the right place.

Failing to report all sources of income

Forgetting to report all sources of income, such as freelance work, rental income, or stock dividends, can result in underpayment of taxes and potential penalties. Review your financial records thoroughly to ensure you’ve included all income sources on your return.

Not seeking professional help when needed

If you’re unsure about any aspect of your tax return or need help navigating complex tax situations, it’s wise to consult a tax professional. They can help ensure your return is accurate, identify potential tax savings, and provide peace of mind during this stressful time.

If you or someone you know needs tax help, reach out to Heritage Tax Company at (207) 888-8800.  We work with a variety of taxpayers to solve a myriad of tax problems, ranging from back tax filing to tax planning.  We look forward to working with you!