Over $1 trillion is paid in individual income taxes each year.
Taxes are the price we pay for civilization. Taxes make possible all the services and benefits we enjoy, including infrastructure, education, healthcare, and social security.
So, paying your taxes is important.tri
However, there are many common mistakes taxpayers make. These mistakes can lead to an audit, a tax lien, or even worse, a criminal investigation.
Here are five common mistakes for taxpayers and how to avoid them.
1. Not Filing Your Tax Returns
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While this may seem like a minor mistake, it can have serious consequences.
If you don’t file your taxes by the tax filing deadline, the IRS will send you a notice and may initiate an audit. And, if you owe back taxes and do not pay them, the IRS can garnish your wages or seize any bank accounts that have money in them.
If you have unfiled tax returns, file them immediately.
2. Missing a Form
If you are missing a form, the IRS will send you a letter asking for it.
This could be a reminder that you need to send in your W-2 or 1099. Or, it could be an updated version of the form that they require more information on.
If you get one of these letters, send back what they ask for right away.
3. Not Filing for the Earned Income Tax Credit
The EITC is a tax credit that can provide you with a refund. It can also reduce the amount of taxes you owe.
To claim this credit, you need to file a tax return even if you do not have any other income or deductions to report. If you qualify for the EITC and did not file a tax return, it could mean that you are missing out on substantial financial help.
4. Taking the Wrong Deductions or Credits
If you are like many people, you might be tempted to take tax deductions and credits, even if they are not applicable.
The IRS wants all taxpayers to report only their true expenses, so they can tax them accordingly. If you claim a deduction or credit that is not valid, it could mean that the IRS will send you an audit letter asking for more information.
If you do not have the information to prove that you qualify for a deduction, it is best to leave it off your tax return.
5. Not Signing and Dating Your Return
If you are filing your tax return, you must sign and date your return.
This will prevent someone else from claiming the refund or changing your return. If you are filing jointly with your spouse, both of you must sign and date the return as well.
Avoid These Common Mistakes for Taxpayers
There are many common mistakes for taxpayers that you need to watch out for.
If you are filing your return, check for any mistakes before you submit it. You should also keep all receipts and documentation handy in case the IRS requests them during an audit.
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