Many Americans who have simple tax situations choose to file their taxes by themselves. However, all too often, mistakes on tax forms can send up red flags for the IRS that may lead to tax debt. Fortunately, when you work with a compassionate Louisiana tax resolution specialist, you can get one-on-one tax advice that can help you avoid mistakes in the future.
Six Common Mistakes People Make When Filing Their Taxes
1. Selecting the Wrong Filing Status
The filing status you select for your tax return each year has a direct impact on the amount of taxes you will have to pay based on your tax bracket, the deduction and credits you qualify for, and even the dependents you can claim. There are several filing statuses American taxpayers can select, including single, head of household, married filing jointly, married filing separately, and qualifying widow/widower.
Most unmarried people can file taxes under a single status. However, if you are unmarried and you have dependents (such as children or disabled parents), you can file your taxes as a head of household. Married people may choose to file jointly or separately, depending on the financial circumstances of the marriage. If you are in the middle of a divorce, you should opt for a married filing separately status to protect yourself from tax liability.
2. Making Math Errors and Income Reporting Errors
Making simple errors on your return can also be a mistake. Some people make math errors, such as missing a decimal point or failing to add and subtract sums correctly. Math errors are more common for paper filing, but these errors can also happen if you use tax filing software, so always double-check your math. You should also check that you are using the correct tax schedules.
Some people may also make errors in income reporting. The IRS knows exactly how much money you have earned this year, so these sums should be reflected on your income reporting schedule; if the sums on your W-2 or your 1099 don’t match the numbers the IRS has, your return will be flagged. You also need to report all the income you have earned, whether this income is from investments, stocks, or foreign assets.
3. Choosing the Wrong Deductions or Credits
Sometimes, taxpayers don’t understand the rules for deductions and credits. Usually, if you are using tax preparation software, you will not be able to take deductions you are not qualified for. But if you choose to file your taxes with paper forms, or you want to itemize your deductions, the process is much more complex, and this can lead to errors. Taking credits and deductions that are not entitled to can be a major mistake that can jeopardize your return.
You Might Need Help Finding Deductions
When you file your taxes with a tax consultant, you can feel more confident about the deductions and credits you are taking on your tax return. Missing deductions and credits can cost you just as much as taking credits you aren’t entitled to, since this can impact your tax refund. With the right deductions and credits, you will be able to increase your refund.
Some common credits include the Earned Income Tax Credit and the Child and Dependent Care Credit, both of which can reduce the taxes you owe each year. Deductions can include the home office deduction, qualifying business expense deductions, and deductions for out-of-pocket healthcare costs. You may even be able to qualify for special credits, such as getting a tax credit if you make green energy improvements to your home.
4. Filing Your Taxes Too Early
Since many people struggle to meet the tax filing deadline, it would seem like filing your taxes early is a good idea. However, filing your taxes too early can be a mistake because you could end up missing important documents that will delay your tax return. If you file your taxes without having all of your income tax records, bank records, and other documents for the year, then you might need to file an amendment.
Usually, your income tax records for the year are mailed out by your employers by the end of January. Tax records for student loan payments, stock and investment accounts, and health account records are also sent around this time. Aside from important documents that are sent to you, it’s also best to have records about your charitable donations of over $300 and receipts for major expenses, such as healthcare costs and school tuition.
5. Inputting the Wrong Bank Account Information
Whether you are expecting a tax return or you need to pay the IRS to settle your tax bill, you should be careful about inputting your bank account information. Missing a number on your bank routing number or your account number can delay your payment schedule, which can either delay your return or make you delinquent on unpaid taxes.
6. Skipping the Healthcare Mandate
Depending on how you get your healthcare coverage, skipping health insurance forms on your federal return can prompt an error from the IRS. Under the IRS’s Individual Shared Responsibility Provision, each member of your household must have healthcare coverage or must be qualified for an exemption (such as having state health insurance rather than private insurance). If you don’t claim your health insurance on your tax return, you may get a penalty on your return.
How Do You Know You Need Louisiana Tax Resolution?
If you receive any correspondence from the IRS about tax errors or a notice about a balance due for tax debt, this is the first sign that you need to contact a tax specialist right away. It’s crucial for your financial stability to handle matters with the IRS quickly and correctly, since missing deadlines or providing the wrong documents can derail your case and add penalties to your account.
What Steps Will a Tax Consultant Take to Help With Your Tax Issues?
A compassionate tax consultant will take the time to get to know you, your financial situation, and your tax issues before giving any advice about a tax resolution. Your case is unique, and it’s just as important to understand what caused your tax situation as it is to make resolution plans. As part of your Louisiana tax resolution services, your case will be handled by an experienced team.
Part of the tax resolution process is investigating your tax situation, including any penalties such as liens and wage garnishments. During the investigation, these penalties are immediately halted to give you some financial relief, so you have the time to explore your options. Finally, your consultant will negotiate with the IRS on your behalf to set up a resolution plan, which can include an affordable installment agreement or even a settlement paid to the IRS.
While there are several mistakes you can make on your tax return, many of these mistakes are easy to avoid if you double-check your tax forms before turning them in. But if you want more reassurance, you can always work with a professional tax consultant to help you file your taxes each year, so you can avoid costly mistakes. Contact Geaux Tax Resolution, LLC for more information about filing taxes.