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Do you feel stressed paying your taxes?
You’re likely wondering if you’ll have enough money set aside to pay your tax obligations. What happens if you owe back taxes, penalties, and interest? Do you have enough for that?
What happens if you fail to remain compliant, even if you have no intention of violating the rules?
Filing and paying taxes in the U.S. is a huge stress. But there are certain tax mistakes that you can easily avoid.
Here’s what you need to know:
- Always File on Time
Make sure you look up the tax filing deadlines and submit your tax forms within that deadline!
Something as simple as not filing your tax return on time can lead to harsh penalties as well as a potential audit. You might be considered “non-compliant” if you don’t file your tax return on time. This can lead to serious legal issues later.
If you need to request an extension to file your tax return, make sure you request one as soon as possible.
If you’re a business owner or freelancer, you might also have to pay estimated taxes each quarter.
- Get Professional Help
The fact is, the U.S. tax laws are too complicated for the average American to understand. It’s likely going to remain this way for quite a long time.
As such, you want to use professional tax filing software to help you file your tax return. You can look at this website https://www.taxfyle.com/blog/turbotax-alternatives to find great options for tax filing software.
- Look Out for Tax Breaks
There are plenty of ways to reduce your tax burden by looking for tax breaks.
For example, in 2020 many Americans were sent stimulus checks to supplement their income. This was to assist them with the financial hardship that came with the COVID-19 pandemic.
But what if you received a letter confirming that you were eligible for a stimulus check and didn’t receive one? Many Americans were able to get a discount from their tax burden for not receiving their stimulus check.
If you’re a business owner or freelancer, you might be able to reduce your tax burden from your expenses. You might not receive your tax refund on time, but you should still request a tax break if you’re eligible.
- Double-Check Your Bank Account Information
If you’re filing your tax return online, you’ll have to include your bank account information on your tax return.
This bank account information is for paying your taxes as well as receiving any eligible refunds.
If you input incorrect information, you’ll miss paying your taxes on time. You’ll then have to pay penalty fees and even an interest payment on this penalty!
You also won’t receive your tax refund on time. Make sure you always double-check your bank account information before filing your return.
As a side note, make sure you always sign your tax return. This is a common error and it can delay your tax return. If you submit your tax return without your signature, then you’ll have to re-file and potentially be subject to penalty fees.
- Report All Your Income
This is perhaps one of the biggest mistakes that one can make when filing a tax return.
You need to keep track of all the income you earn during the calendar year. If you have a job and that’s your sole source of income, this isn’t a challenge. You’ll wait for your W2 form to arrive and then report the income on your tax return.
But what if you have multiple sources of income? You must keep accurate records of this income. In some cases, you might receive 1099 forms with this income. In such a case, these 1099 forms are also sent to the IRS.
But even if you don’t, you still have to report this income to the IRS. Keep track of income from your side hustle, freelance work, investments, etc.
Even if you earn money in cash, you should report this income on your tax form. If you earn money that’s less than $600, this generally isn’t taxable. However, you should still report this income to be on the safe side!
If the IRS notices any discrepancies or believes you’ve omitted income, you might be subject to an audit. You might also have to pay penalties.
If you’re an American and you live abroad, your foreign income might also be subject to taxation by the IRS. Don’t just report your American income to the IRS. If you live in the U.S. and earn income from abroad, you’ll have to report this as well.
- Check Your Math
If math isn’t your forté, then you’ll have to work on improving it! The IRS might slap a penalty fee if you make a math mistake on your tax return.
You don’t want to accidentally under-report your income and then receive a penalty from the IRS. You might even miss out on a tax refund or tax break if you make a math mistake.
You want to always have a calculator on hand when filing your tax return. You have to check your tax return several times before you submit it.
- Fixing Your Errors
So what if you’ve submitted your tax return and you ended up making a mistake after all?
You must immediately file an amended tax return. On this form, you’ll acknowledge you made a mistake and that you wish to rectify it. This is the fastest way to fix an error and avoid a penalty.
If you don’t do this at all, you’ll face penalties and can also expect a delay with your tax refund.
Avoid These Tax Mistakes
If you avoid these tax mistakes, you’ll have an easier time handling your tax obligations.
Make sure you always file your tax return on time. You should also always use filing software for submitting your tax returns.
You should also look out for tax breaks and other methods for legally reducing your tax burden. Make sure you also report all your income and that you double-check your math!
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