Top 10 Income Tax headache you want to Avoid
The 2013 tax filing season has officially begun and while many people are trying to make sure they take advantage of every tax deduction possible, it bears covering some simple mistakes or errors in judgment that are committed which can become a real tax headache later on.
Perhaps the most common mistake made by paper and electronic filers is omitting their social security number from the filing and entering the wrong number respectively. This will get the return rejected but it may take weeks or months for the IRS to find the error.
- Another common error is missing the April 15 deadline. No matter how good your excuse was, failure to meet the deadline will result in a penalty for late filing – an unnecessary expenditure of money.
- A big mistake is refusing to file a return. The IRS is not someone you want to piss off as many celebrities turned prison convicts can attest to.
- As bonehead as this sounds, remember to sign and date your tax return. Every year one million Americans forgot to do that very thing.
- Gather your receipts somewhere safe in the event you get audited. The IRS will not accept anything else in lieu of proof.
- Double check your math if you are paper filing. In fact, just spend the money for tax software even if you plan to paper file to avoid any arithmetic mistakes.
- Do not claim fake dependents on your return such as pets. The punishment for that is up to 3 years prison and $250,000 in fines.
- Double-check your tax preparer’s work because you are ultimately responsible for any mistakes.
*If you have domestic help and pay them more than $1,800 in income you must pay the employer FICA tax. It’s much cheaper than the penalties that add up for failure to pay it.
Other Common Tax Errors:
- Filing the wrong forms
- Filing under the wrong status
- Not filing or calculating self-employment tax
- Failing to check whether or not you are subject to the alternative minimum tax
- Mis-using or not using the earned income credit
- Failing to pay attention to changes in tax laws
- Failing to declare all income