Avoid These Mistakes During Tax Season
January 27, 2020
Now that the holidays have passed, tax season is upon us! Making mistakes on your tax return can cost you money. If you own a small business, making a mistake on your tax forms could be damaging to your company and should be avoided at all costs. The best precaution opposite these scenarios is a good offense, specifically avoiding errors on your return. Here are some tips.
Waiting to file
We could list many reasons why taxes aren't something to procrastinate about until the last minute. What if it ends up being more complicated than you thought? You may not have enough time to file on time. If you are expected to file an income tax return, be sure to submit it on time to avoid late fees and penalties. If you don't have everything that you need to file, you can file for an extension. The IRS imposes separate penalties for filing late and for paying late, so it's better to at least get the return in on time. If you're not required to file, you should consider preparing a tax return anyway. That's because you could be entitled to money back from the government through different refundable tax credits and other benefits. Also, if you file on time, you get your money back sooner so you can put it to work.
Not hiring a professional
Can you do your own taxes? The answer is probably yes. But when you do it yourself, there's always the risk of making a mistake. And the stress doesn't stop after filing your taxes either – it stays until you receive your refund. Do you often ask yourself: am I doing this, right? If yes, then you should consider that this type of stress isn't worth it. Instead of feeling anxious at the idea of having made a mistake on your taxes - which could result in an audit - have a professional handle it for you. Finding a tax professional that you trust will feel like a huge weight lifted off of your shoulders.
Missing out on last-minute tax-savings opportunities
Money placed into traditional retirement accounts is eligible for an immediate deduction and is then taxed in retirement. You can make contributions to an IRA account by April 15, 2020. If you are 50 or younger, you can make up to $5,500 in contributions (or $6,500 if you turned 50 or older last year). There's another type of IRA you can choose: a Roth IRA. Though the contributions aren't tax-deductible, the account grows tax-free.
Not knowing which write-offs you are entitled to
Some people might fear that some deductions are an audit red flag and stay away from them. For example, there is the myth that claiming a home office deduction can trigger a tax audit. This is not true, and to make claiming the deduction easier the IRS created a simplified deduction alternative to writing off actual expenses. So as long as you meet the requirements for a deduction, take it.
Deciding to hire an accountant is the first step in appropriately managing your finances. Our team at Bounds Accounting & Tax Services, LLC, offers tax preparation and planning services for individuals, businesses, trusts, and non-profit organizations. We strive to minimize liabilities and maximize returns. If you have received an IRS or state notice, we can contact the IRS on your behalf to help resolve your tax problems. Contact us to schedule your tax preparation appointment.