Tax season can be one of the most stressful times of the year for individuals and business owners alike. On top the headache that comes with trying to get it done on time there’s errors you have to worry about that can lead to the IRS paying an unwelcome visit to you. If there’s one thing that can attract the attention of the IRS it’s making mistakes on your tax return so here are some common mistakes you should avoid.
While you don’t have to be an AP calculus student to get the math right on your returns it is very simple to make errors when calculating the actual figures on your taxes. It is so common that the return rate of tax returns to their owners because of math errors was 21% and in 2014 they’ve observed about 2.3 million errors from previous returns (https://www.fool.com/retirement/2017/01/21/4-tax-mistakes-that-could-lead-to-an-audit.aspx). The best way to avoid this is to file your taxes electronically or have an actual professional do it for you as the rate of math errors have gone down significantly on returns that were done using accounting software or using experts. Just to be on the safe side always double check your math manuals before you send it in.
It is common for people to mix up their debit and credit figures easily luckily there are bookkeeping programs that can fix that such as QuickBooks, GnuCash and Outright.com that can do the work for you. Just remember that deductions determined how much of your income is taxed while credits are the dollar reductions in your tax liability. Writing the wrong social security number on your tax return is another reason as to why the IRS may want to audit you but the solution to this issue is pretty much self explanatory. Go over your return to make sure the correct information is in the right place to avoid needless revisions in the future.
Although sometimes there are legitimate reasons as to why the information on your 1099 forms and your return may not match up generally your W2 should be as consistent as the information on your return. If you get an information return such as your W2, 1098 or 1099 that’s inconsistent its best you contact the person who prepared it and have them send you the correct version.
Failure to report the right income
Not matter where you earn your income you are required to pay taxes on what you’ve earned and failing to do so could lead to some legal issues. The IRS already receives a copy of your 1099 form so with holding any revenue you’ve made will increase your chances of being caught. Typically if you made more than $ 600 as an independent contractor for example it should be reported and included in your 1099 form and even if you don’t that much in the year you’re still expected to write what you’ve earned even if it’s less than $500.
For small businesses and individuals alike donating to charities is one way you can get your taxes deducted. It’s good to be generous but being too charitable would raise suspicion to your business as the IRS regularly compares how much businesses and households can donate in respect to their income level but if it’s too high they may be under the impression that you may be lying. You can research how much you can donate in terms of how much you make by researching the average donation amount and the income level associated with it.Doing your taxes can be a very frustrating and confusing process but if you avoid these errors you will decrease your chances of getting an audit by the IRS.