Taxes are confusing, and they change every year. Let’s go through some common tax problems and how to avoid them.
Filing Late
1 in 5 taxpayers waits to file their taxes until just one week before the (typical) April 15th deadline. Missing the filing deadline is expensive: if you fail to file on time, you can expect to pay a penalty of 5% of the unpaid tax for every month or part of a month that the return is late, up to 25% of the unpaid tax.
To avoid this, the best practice is to file early. Start thinking about tax prep in January, whether that means gathering your documents and sending them to your preferred tax preparer or gathering all documentation and applicable forms for completing your return yourself.
However, if you think you are going to miss the deadline, you should always file for an extension. You can file Form 4868 to push the filing deadline back 6 months – but you still need to pay any taxes you still owe at the same time that you file for the extension. Click here for accurate deadline dates.
Typos & Missing Information
There are lots of boxes to check and lines to fill out, and it’s very easy to accidentally mess up your SSN or report your income as $52,986 instead of $52,896. Errors that occur when filling out the complicated and often numerous tax forms are very common.
To avoid this, you should always go through your forms slowly and deliberately, and also more than once. A good double-check is often the best way to fix errors before you file. Be sure to reference your tax forms and banking information (routing and account numbers) to ensure all the data is correct and present.
If you are unsure how to find certain information or are looking for a second opinion, you can always contact a trained tax professional to have them check your work.
Miscalculations
Because it’s so easy to make small but mighty mistakes when you are entering your information on the appropriate forms, it also means that it’s very easy to file a tax return with miscalculations. This is the most common problem found on tax returns.
Like with typos, it’s important to check your calculations more than once. It’s also helpful to use tax preparation software so your math will be as accurate as possible.
Working with Outdated Tax News and Information
The US tax code is lengthy and ever-changing. It’s very easy to prepare your taxes with unknown errors due to recent changes. The best place to find the latest tax news is on the IRS website. Check it early, and check it often.
Filing the Wrong Tax Forms
Just like it’s easy to create tax errors by not being up-to-date on your tax code changes, it’s also very easy to get confused about which forms you should be using.
Luckily, the IRS has simplified some of this by eliminating Forms 1040A and 1040EZ in 2018, allowing for the overall use of Form 1040.
If you’re not sure what forms to use, or you think you may have been given the wrong forms, you can always reach out to a tax professional or do some research on the IRS website or another reputable tax advisor
Don’t Waste Valuable Time, Send Your 1099s to the Experts
For more tax season tips, check out our blog, which includes articles like “5 Practices to Prepare for Tax Season Year-Round”, and much more.
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