When you’re filling in your tax return, it is easy to make mistakes. There are some basic errors, such as giving the wrong date that you can avoid simply by filing electronically. Other mistakes are more serious in nature as they could make you miss out on a refund, delay it or trigger an audit. Here are some mistakes that could cost you dearly.
You don’t take all the deductions you can
You may not want to take a certain deduction because you fear it will raise a red flag and trigger an audit. This often happens when people want to take a home office deduction but don’t know whether they’re really entitled to it. As long as you meet the tax law requirements for a deduction, not taking it is a mistake. For example, you can take a home office deduction if you’re self-employed.
If you don’t take write-offs you’re entitled to, you will end up paying more tax and this could result in sitting with unnecessary tax debt. Fortress Tax Relief offers tax relief programs that can result in settling your tax debt for a small portion of the amount you owe.
You take the standard deduction
If you automatically take the standard deduction, you could be paying more tax than you should. Itemizing does require more of you as you need to have receipts and other proof. Note that the standard deduction has nearly doubled since the 2018 tax year so itemizing is now not as likely to save you money as it did before.
You should run the numbers to check which alternative gives you a greater write-off. Most tax software automatically calculates which method is best for you to use.
You choose the wrong filing status
The five different filing statuses and if you want to maximize any refund you’re owed, it is important to choose the correct filing status. For example, if you’re a married couple, you can choose to file separately or together.
You need to choose the status that means you owe less tax. If you qualify for more than one filing status – say you’re single and head of your household – choosing the wrong one could result in a lower tax refund. Choosing the right filing status can make a difference.
You fail to correctly declare exemptions
The IRS offers spousal and dependency exemptions but they require certain information if you want to benefit from these. For spousal exemptions, the IRS needs your age and the age of your spouse, as well as your gross income amounts. For dependency exemptions, you must disclose your relationship to the dependent and the amount of support you provide.
You don’t enter information as it’s been reported to you and the IRS
Dividends, wages, and other income you receive are reported on information return forms that you receive. For example, 1099-R forms report the distribution of retirement benefits like annuities and pensions withheld over the course of the year or report funds withdrawn from an IRA. The IRS computers have this information as the forms also have to be reported to the IRS.
Some funds may be treated as income and you need to attach any forms that report income to your tax return as it may just bump you into a higher income bracket.
If the 1099-R has withholding taken, this can help you get a refund of any difference after your taxes are paid. You can dispute any information reported to you and request a correction if you need to but failure to attach any information forms you receive can result in an audit.