Common Mistakes People Make When Filing Tax Returns
For many, filing taxes is intimidating. However, to guide and advise you, accounting, bookkeeping, and tax consultants study the tax laws and the procedures related to them. They help minimize personal and business obligations tied to finances which in turn reduce the chance of audits from the IRS or the state tax agency.
Still, many people plan to file their taxes on their own, but in the process of doing this, they get caught up in a web of trouble. Miscalculations, incomplete forms, and wrong data are only a few of the mistakes people make when filing tax returns.
In case you plan to take on tax returns on your own or if you are filing your taxes for the first time, it would be wise to understand the basic errors. To help you out, here’s a list of the most common mistakes people make when filing tax returns, and how to avoid them.
1. Not keeping track of relevant documents. Usually, some documents mailed to you include important tax-related documents but unfortunately, these tend to get misplaced. These documents may be very crucial in determining your tax liability or credit. Try to make a habit of filing your bills and tax documents. Saving electronic copies of bills will ensure they are readily available while filing tax returns.
2. Not keeping a record of personal and business expenses as well as self-employed income. These records help you save time and money if they exist and are accurate. Using bookkeeping software when you are self-employed makes it easy to produce a statement of profit and loss.
3. Filling incorrect information on the tax return application. People usually enter information that does not match IRS records. Your name, date of birth, and filing status must be checked before filing tax returns. A copy of the previous year’s returns and SS cards help to verify data entered into the current return application.
4. Mis-classifying business activities. Knowing what is and what is not deductible makes it easy to apply deductions on the returns if correctly classified. Lack of knowledge on the proper classification of income and investments can misinterpret the tax you need to pay.
Avoid these and other similar mistakes by connecting with the experts at M-E Accounting & Tax Services, Inc. As the best accountants and bookkeepers in Cape Canaveral, FL, we have extensive experience in serving small businesses and individuals in and around Central Florida. Our goal is to save you time and money so you can focus on the things that matter to you most.