There are mistakes you cannot afford when filing taxes. Whether you are doing it manually or through electronic filing taxes, these are important points you have to remember to avoid penalties. U.S. News details the whole report.
Filing Taxes and the 5 Mistakes You Have to Avoid
Sure, for plenty of individuals, if taxes come out of your paycheck, and you don’t have much excitement in your financial life, you may be perfectly fine with thinking about taxes and the Internal Revenue Service for just a few weeks or days in the first few months of the year. But there are plenty of other taxpayers who aren’t so lucky. They may be making mistakes right now that will haunt them later.
- The first common mistake is forgetting to make estimated tax payments. This problem is particularly applicable to self-employed payers who usually receive money without withheld taxes. As a self-employed payer, you have to be responsible for your own estimated tax payments based on your net income.
- Second is forgetting to keep track of alimonies. This problem occurs when spouses record different figures on their respective tax reports. When this happens, IRS will not allow you to deduct your alimony from your taxes.
- The third common mistake is deliberately failing to report all income earned. A lot of self-employed payers do not report their earnings. This could pose problems in the future when IRS requires you to submit bank and cash transactions.
- The fourth common mistake is forgetting about depreciation costs from rental income. Schedule E is where your income and expenses are balanced while your Form 1040 is where your net income or losses are reported.
- Last but not the least is forgetting to withdraw from your IRA. Once you hit 70 ½ years old, you will be required to make IRA withdrawals before the end of the year. Otherwise, you will be penalized half of the amount you are supposed to have withdrawn.
Why You Have to Avoid These Filing Taxes Mistakes
The reason why these mistakes are so common is the fact that their consequences do not manifest immediately. Because payers are not automatically penalized for forgetting to file, whether unintentionally or deliberately, they tend to forget or think that it is okay to overlook it. The truth is, authorities will always find a way to get back to you when you do not pay your taxes. After all, it is the lifeblood of any government.
Plan Ahead When It Comes to Filing Taxes
— POLITICO (@politico) November 20, 2017
One way to lighten the burden when it comes to filing and paying taxes is to plan ahead. Do not wait until April before you start gathering all your income, expenses, and savings. As much as possible, list down all your money transactions and keep your receipts. All this information will help you complete your report and make it as accurate as possible.
Money Talk News shares a few tax hacks to avoid any issue when filing taxes:
Have you ever found yourself making the same mistakes as these? Share your experience with us in the comments section below.