5 Errors in Tax Preparation and How to Avoid Them
It’s every person’s worst fear to make a mistake on their taxes. Too many mistakes on a tax return can cause an audit from the IRS.
Though, the chances of getting an audit from the IRS are slim to none if you practice a great tax preparation strategy.
4% of all tax returns are audited by the IRS. This means that it’s not difficult to file your taxes the right way.
Still, it’s important to be aware of some common errors in tax preparation before getting started. In this article, we’ll list the common errors people make when filing their taxes.
1. Missing Tax Payment Deadlines
April 15th is usually the due date to submit individual tax returns. If you miss this date, you should still send in your tax return as soon as possible.
Though, you may be forced to pay penalties and interest on top of what you owe. If you miss a deadline by several months, then you could owe back taxes.
This could lead to a tax demand note sent by the IRS. This letter is an official demand from the IRS that you should pay your taxes immediately.
Circle your calendar to make sure you don’t miss the tax payment deadline. A memory lapse can lead to hundreds and even thousands of dollars in penalties.
2. Entering False Information
This is probably the most common mistake people make on their taxes. When filling out a tax return, it’s common to enter your:
- Social security number (SSN)
- Employment identification number (EIN)
- Bank account numbers
- Retirement account numbers
If you get a single digit or letter wrong, you’ll have to go through the long process of amending your return.
If you make too many of these clerical mistakes, you may receive an audit. Because of this, it’s best to double-check your tax return before sending it in.
If you have changed your name (legally or because of a divorce), you should reflect it on your tax return.
3. Not Listing any Dependants
This isn’t a punishable error. Though, if you fail to list dependants on your tax return, you could be missing out on great tax benefits.
For example, you can receive child tax credits for each child or minor you provide for.
When listing dependants on your tax return, make sure their names and birth dates are correct. Doing so will prevent any unnecessary delays.
4. Failing to Report Cryptocurrency Gains
Cryptocurrencies like Bitcoin are very popular right now. If you’re making a lot of money trading or selling Bitcoin, you need to report these gains to the IRS.
Granted, cryptocurrencies aren’t traditional income. It’s best to hire an accountant or tax planner that will help you report this income properly to the IRS.
5. Entering Amounts on the Wrong Lines
Don’t make the mistake of filling out a tax return in a rush. You should also avoid completing a return if you aren’t sure which fields need to be filled out.
Again, hire a tax planner to make sure your tax return is suitable for the IRS.
Avoid These Errors in Tax Preparation
If you are doing your taxes early, make sure to avoid these errors in tax preparation. Doing so will help you avoid penalties and an audit from the IRS.
Do you want to learn more about tax preparation? If so, check out more of our helpful articles.