Common Tax Mistakes to Avoid during the 2024 Tax Season
Tax season can be stressful and confusing, especially with the changes and updates that happen every year. Making mistakes on your tax return can cost you money, delay your refund, or even trigger an audit by the Internal Revenue Service (IRS).
These are some of the things to think about as we head into the next tax season. To help you avoid these pitfalls, here are some common tax filing mistakes and how to avoid them.
1. Choosing the wrong filing status
Your filing status determines your tax rates, deductions, credits, and eligibility for certain tax benefits. You should choose the filing status that best suits your situation, such as single, married filing jointly, married filing separately, head of household, or qualifying widow(er) with dependent child. If you are unsure which filing status applies to you, you can use the Interactive Tax Assistant to find out.
2. Missing or incorrect information
You should make sure that your name, Social Security number, and filing status are correct and match the information on your Social Security card. You should also check that the names and Social Security numbers of your dependents are accurate and that you have entered the income and deductions on the correct lines. If you receive any forms such as W-2, 1099, or K-1, you should report the income exactly as it is shown on the forms, as the IRS will match them with their records. If you need to dispute or correct any information on these forms, you should contact the payer and request a revised form.
3. Overlooking deductions and credits
You may be eligible for various deductions and credits that can lower your tax bill or increase your refund. Some of the common ones include the standard deduction, the earned income tax credit, the child tax credit, the child and dependent care credit, the education credits, and the retirement savings contributions credit. You should review the eligibility requirements and the amount of these tax breaks and claim them if you qualify. You can use the Deductions and Credits Tool to find out what you can claim.
4. Forgetting how life events affect taxes
Certain life events can have a significant impact on your taxes, such as getting married or divorced, having a child, buying or selling a home, starting or losing a job, retiring, or inheriting money. You should be aware of how these events affect your income, deductions, credits, and filing status, and report them accordingly on your tax return. You may also need to adjust your withholding or estimated tax payments to avoid underpaying or overpaying your taxes throughout the year.
5. Neglecting to seek help
If you are unsure about how to prepare your tax return, you can seek help from various sources, such as tax software, tax professionals, or IRS resources. Tax software can guide you through the process and check for errors and omissions. Tax professionals can offer advice and assistance and prepare your return for a fee. IRS resources, such as the Free File tool, Volunteer Income Tax Assistance (VITA), and Tax Counseling for the Elderly (TCE), can provide free or low-cost tax help, information, and tools. You should choose the option that best suits your needs and budget.
However, you should only use free tools and online filing software if you are filing a simple tax return. A simple tax return is the one that only has income from a single source, for example, wages and salaries. However, if you earn income from more than one source, own a business, or a hobby, you must seek professional help regarding submitting your tax returns. This helps you avoid making all the mistakes mentioned above and even increase your refund and save more money on taxes.
Conclusion
By avoiding these common tax filing mistakes, you can save time, money, and hassle, and file your tax return with confidence and accuracy. Remember to file your return by the deadline, which is April 15, 2024, unless you request an extension.
You can contact my team at 202-618-1295 or visit this LINK to let me prepare and file your 2023 tax returns.
Frequently Asked Questions
1. What is the most common mistake made on taxes?
The most common mistake on taxes is often errors in filing, such as mathematical miscalculations, missing signatures, or providing inaccurate information. Failing to report all sources of income and overlooking available deductions are also common errors.
2. What are the biggest tax mistakes business owners make?
Business owners commonly make mistakes such as inadequate record-keeping, mixing personal and business expenses, misclassifying employees or contractors, and not staying informed about changes in tax laws. Additionally, failing to take advantage of available tax credits and deductions can be a significant oversight.
3. How can taxes affect business?
Taxes can impact businesses in various ways, including affecting profitability, cash flow, and decision-making. The tax structure chosen for a business, compliance with tax regulations, and the ability to leverage tax incentives can significantly influence a company’s financial health.
4. What is a common mistake of business owners?
A common mistake of business owners is neglecting proper tax planning. This includes failing to optimize deductions, not keeping accurate financial records, and overlooking tax credits that could benefit the business. Inadequate planning may lead to missed opportunities for tax savings.
5. How can taxes affect entrepreneurs?
Taxes can impact entrepreneurs by influencing their business decisions, affecting personal income, and influencing investment strategies. Entrepreneurs need to consider the tax implications of their ventures, structure their businesses tax-efficiently, and stay informed about tax changes that may affect their operations.
6. How do tax changes affect economic growth?
Tax changes can influence economic growth by impacting consumer spending, business investments, and overall economic activity. Tax policies that encourage spending and investments often stimulate economic growth, while tax increases or unfavorable policies can have the opposite effect by reducing disposable income and discouraging business expansion.
