It’s that time of year again. That time where you have to update your tax filing status. Here are 3 mistakes you need to avoid when filing taxes!
The US government is expected to take in more than $3.6 trillion in taxes in 2020.
Compared to that vast sum, your own tax return may feel like a small fry. That doesn’t mean that the IRS won’t be on your case if you get things wrong, however.
Mistakes such as using the wrong tax filing status can mean you end up paying too much tax. In the worst cases, mistakes in your tax return might even bring an audit down on your head.
Read on as we take a look at three common mistakes you need to avoid.
1. Not Filing a Return at All
For some people, when it comes time to submit their tax returns, they prefer to bury their heads in the sand.
If you miss the deadline, you face penalties, interest on the amount owed, and maybe even charges of tax evasion. If you’re really struggling to pay, contact the IRS to see if you can set up an installment payment plan.
Some people fail to file a return because they think they’ve fallen below the threshold. Remember that thresholds vary with status and age, so you’ll need to double-check that you really don’t owe any tax.
2. Using the Wrong Tax Filing Status
When you submit your tax return you will need to do so under one of the following five statuses:
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er) with dependent child
Your tax filing status will determine the rate of tax that you need to pay.
Choosing the wrong status can lead to you paying more tax than you need to. If you fall under more than one category, you are well within your rights to choose the status with the lowest tax burden.
For example, a single parent would have a larger standard deduction and possibly a lower rate of tax by filing as a head of household, rather than single.
3. Missing out on Tax Deductions
There are plenty of credits and deductions available when completing your tax return.
So many, in fact, that it can be easy to miss out on some of the deductions that you are eligible for. You then end up paying more tax than you actually need to, and you can bet that the IRS won’t be rushing to return the excess.
One of the simplest ways to ensure that you’re only paying the tax that you need to is to hire the services of a professional such as a Polston IRS Tax Attorney. They will be able to find every deduction and credit available to you, as well as advising you on the best tax filing status to use.
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We hope this article has ensured that you won’t be submitting under the wrong tax filing status in the future.
Steer clear of these mistakes, and your tax return should be plain sailing.
If you’re looking for more great advice for all things financial, then be sure to check out the rest of the site.