Common Tax Problems to Avoid

These Are the Common Tax Problems to Avoid

Have you ever secretly worried that you’re doing your taxes wrong and are opening yourself up to potential IRS investigations? Don’t worry, you’re not alone.

Tax problems are quite common and can happen to anyone. That being said, they still carry potentially devastating consequences. The smallest tax mistakes can harm your finances and, if the problem is long-standing, can result in seizure of property or more drastic measures.

This article will explore common taxpayer issues that you can (and should) avoid.

1. Not Filing Taxes

Not filing your taxes on time is one of the most common tax problems, and is considered tax evasion by the IRS. If this happens, you will face penalties and will have to undergo an IRS tax resolution. Unfiled taxes can arise from either not meeting the tax deadline or if you don’t file at all.

Around 6% of tax problems contributing to the tax revenue gap are caused by people who don’t file their taxes.

If you don’t file your taxes when they’re due, you can face a failure-to-file penalty. If this happens quite often, the IRS can resort to more serious measures, such as seizing assets or filing charges for tax evasion.

2. Math Mistakes

Math mistakes are also quite common among taxpayers. It is one of the biggest fears that the public faces when they are filing taxes.

Before submitting your reports, double-check your calculations. Tax preparation software can check your work automatically and prevent math mistakes from harming your tax reports.

3. Not Filling Out Forms Correctly

Not double-checking your forms can cause complications and increased scrutiny. Even the smallest mistakes can render your forms unreliable, leading to more work for you in the future.

Some tips to make sure you fill out your forms accurately:

Make sure your social security number is correct

  • Spell your name exactly as it is written on your social security card
  • Check your routing and account number
  • Whether you receive your tax refunds will depend on the accuracy of this information.

4. Choosing the Wrong Filing Status

Tax statuses can be quite hard to understand. You file differently as a single individual than you would as a couple, and tax brackets also differ for different income levels. If you are eligible for more than one tax status, the IRS accepts the classification that will charge you the lowest amount of tax.

To know which tax status you fall under, go to the IRS’s Interactive Tax Assistant.

5. Using The Right Tax Form

There are so many tax forms out there, and it’s only natural to get confused. However, to ensure that your taxes get filed correctly, you will have to double-check and research the most appropriate form to use.

The Form 1040 is the standard tax form used by people to report their income taxes. Form 1040-SR is for taxpayers aged 65 or older.

The W-2 form records the annual wages of employees. Employers will be the ones submitting this document.

6. Not Signing All The Forms

Failing to have all the required signatures will make the tax forms you’ve completed invalid. If you are a couple, you and your spouse will have to sign the forms unless you are eligible for an exemption.

7. Failing to Report All Sources of Income

With more people earning income from more than one place of employment these days, keeping track of where this money is coming becomes complicated. Before you know it, you can be vulnerable to handsome penalties from under-reporting.

Some of this income may be reported by your employers under the W-2 form, but make sure to confirm this with your employer(s). If you are self-employed, you will be the one filing your own taxes through Form 1040.

Keeping a detailed account of your different sources of income throughout the year is a good idea. This way, you’re less likely to leave something out when it’s time to file your taxes.

8. Failing to Report Because of Your Inability to Pay

Making the conscious decision of not filing your taxes because you know you can’t pay is a big mistake. Once the IRS catches on, you will face even more costly penalties. It can possibly open you up to more serious investigations too.

Instead, continue to report accurately and try to pay as much of the taxes as you can according to the deadline. You should also contact the IRS to find out possible tax extension schemes, which will help you pay taxes over a longer period of time.

9. Overpaying Taxes

Some expenses such as medical bills, childcare expenses, and charitable donations are tax-deductible. Reporting them will prevent you from paying more taxes than you should.

There is often some confusion relating to which expenses are deductible. This will involve some research on your part, but make sure to start a list of possible tax-deductible expenses and report them accordingly.

Tax Problems Cost You

One of the most dreaded issues many adults face is having the IRS issued a notice or a penalty because of something in your tax reports that you failed to double-check.

What if you’ve already experienced tax problems, and now the IRS is issuing a penalty? What if you realize you haven’t filed all your taxes in the past? You may need some external advisors to help with IRS tax resolution options, which can include planning your finances to be able to settle penalties without crippling you.

Being aware of the possible pitfalls when filing taxes will help you keep an eye out for them. While reporting inaccuracies may not seem like a big deal, they have far-reaching consequences and consistent errors will drain your finances. Make sure to take your time to truly check everything, and contact the IRS or other tax experts if you are uncertain.

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Article written by admin

By Profession, he is an SEO Expert. From heart, he is a Fitness Freak. He writes on Health and Fitness at MyBeautyGym. He also likes to write about latest trends on various Categories at TrendsBuzzer. Follow Trendsbuzzer on Facebook, Twitter and Google+.