Are you thinking about filing your own tax return this year? Although it's true you will initially save money by doing them yourself, it may cost you more in the long run than if you had hired a tax professional in the beginning. If your taxes are inaccurate or incomplete, it will take the Internal Revenue Service longer to process your return since they'll have to contact you to fix the mistake. The wrong information may also trigger an audit and possibly lead to additional fines, penalties and other harsh consequences.
How to Avoid These 5 Popular Mistakes
If you've chosen to do your own taxes this year without a professional, there are a few common mistakes that you'll want to avoid:
1. Social Security Number
According to the IRS, many taxpayers accidentally use the wrong Social Security number on their forms. Make sure you review that section of the form with your Social Security card close by to make sure everything is correct before you submit your taxes.
2. Filing Status
Another mistake people make when filing taxes is selecting the wrong filing status, which can be a costly error. For example, if you don't claim that you are head of household on your taxes you could lose out on a larger standard deduction. An incorrect filing status can also place you in the wrong tax bracket and lead to further complications with the IRS.
3. Bank Account
Do you want to get your state and federal tax refund by direct deposit? Many people prefer to e-file and receive a direct deposit since they can typically receive their money faster than if they do. However, remember to double check that you are using the right bank account and routing numbers so you don't experience any delays.
4. Transposing Numbers
Your tax preparation software won't notice if you mistakenly type $1,500 instead of $15,000. To make matters worse, it will continue to use the incorrect information you provided for the rest of the tax return. It's easy to transpose numbers when you are writing or typing large amounts of financial data. This could also possibly increase your chances of being audited by the IRS when they receive copies of your tax documents and notice that the numbers do not match. You can avoid this by closely comparing your financial documents before sending it off.
5. Deductions and Credits
Lastly, many people forget to choose the right deductions or credits and include the right documentations. Did you make any charitable donations last year? Or maybe you paid off a significant portion of your student loan? If you forget to include that in your tax return or attach the necessary forms and schedules, you could miss out on several tax incentives. You may also have to file an amended version of your tax return later on. Overall, you may end up owing the IRS more money than you should. One way you can avoid this costly error is to store tax-related documents like your W-2 in a separate folder so you can find all of your financial information in one place next time. At the end of the day, we recommend hiring a professional for your tax preparation so your potential deductions don't fly under the radar.
The deductions and credits you apply for this year might change with new legislation. Educate yourself on the updated, approved deductions so this time next year, you know what you can and cannot claim on your tax return.
If you still want to prepare your tax return by yourself, we highly recommend that you carefully review it the following day (or after you've taken a long break) for any mistakes before you send it to the government.
However, if you want to rest assured that your taxes are done correctly, you should work with a qualified tax preparer. Please contact us today by email or call (817) 533-8294 to learn more about our financial and tax services. We provide tax planning, tax preparation and business accounting services. Our full-service firm can analyze your data and develop a unique financial strategy.
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