7 Deadly Tax Return Sins: The Worst Mistakes People Make
Tax season can bring a lot of stress. You might be afraid of making a mistake that triggers an audit. You might also be fearful of receiving a huge tax bill. If tax time is keeping you up at night, don’t fear. We’re here to tell you about some of the worst mistakes you could make so you can hopefully avoid them.
Here are seven deadly tax return sins to avoid.
Anyone can make mistakes on his or her taxes. Don’t think it can’t happen to you. Be sure to check your forms carefully once you’re finished. Even if you hired a tax preparer, take time to check each page. Some of the biggest mistakes include math mistakes and incorrect or missing Social Security numbers.
Another big mistake is missing or incorrect bank account numbers. You don’t want your refund going to someone else, now do you? If you find yourself in this situation and you catch the error before the return posts to the IRS system, you might be able to stop the deposit. You can make this request by calling the IRS at 800-829-1040. You can also try to locate your refund by using the IRS2Go mobile app or logging on to Where’s My Refund? If you didn’t catch the error in time, you still have some options.
Next: Don’t let this emotion get you in trouble.
Do you owe a large tax bill? Don’t get angry, get a payment plan. Instead of getting mad or ignoring the IRS (not advised), your best solution is to contact them and ask for help. You can even apply for a payment plan online. However, do know there may be some fees depending on the type of plan you sign up for. If you choose a long-term payment plan, for example, there’s generally a $149 set-up fee in addition to accrued penalties and interest until your balance is paid off. If you’re having significant financial problems, reach out to the Taxpayer Advocate Service at 877-777-4778.
Next: You can’t have it all.
Don’t even think about cheating on your taxes. Chances are, you’ll get caught. And if the IRS doesn’t catch you, that doesn’t mean a neighbor, co-worker, or family member isn’t watching. The IRS Whistleblower Office was set up so that taxpayers can report tax cheats. And there’s an incentive to blow the whistle. The IRS says on their website that an award worth between 15% and 30% of the total proceeds the IRS collects could be paid. However, the award is only paid when the amount (including taxes, penalties and interest) is more than $2 million.
Next: Don’t engage in this type of behavior.
Don’t go crazy with the tax deductions. You might end up taking a deduction you shouldn’t have. You could also be setting yourself up for an audit. When it comes to deductions, don’t get creative. If you’re not sure, ask a tax professional. In addition, if you’re about to apply for a mortgage, you’ll want to be even more careful. Taking a lot of deductions lowers your taxable income, which could make it harder to qualify for a mortgage, reports Credit.com.
Next: There is a time and a place for this.
Once you’ve filed your taxes and receive your refund, you might get a surge of excitement from thinking about all the new things you’ll buy. As you click through the pages on your favorite websites, you start moving items into your virtual shopping cart. Although you might think of tax season as a time to shop (if you usually get a refund), it’s best to pause and take a moment to draft a plan for your money. If you don’t have an emergency savings fund, this is the first place your cash should go. After that, plan to pay off some of your high-interest debt.
Next: Control the monster within.
Don’t be envious if friends and neighbors brag about how big their tax refund is. This likely means they’re having too much money taken out of their paycheck. It’s important to pay attention to the number of allowances on your W-4. For example, if you take too few allowances, too much money will be deducted from your check. You’re basically giving the government an interest-free loan. Make sure the correct amount is deducted by reviewing your situation with a tax professional. Afterward, fill out a new Form W-4 and submit it to your employer.
Next: Don’t be messy.
Keep organized records. If the IRS decides to audit you, it will be important to find all the necessary paperwork. Don’t be messy. Whenever possible, consider going paperless so that it’s easier to keep track of your files. Most financial experts recommend keeping financial documents for about seven years. The IRS also has a handy guide on its website to help you determine how long you should keep tax records depending on different situations.
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