3 Common Tax Filing Mistakes

Is there anything more stressful than having to deal with taxes? Some people are able to file their taxes without a problem, while others can run into difficulties. Maybe you had to file late because of an issue with your employer or some personal problems. Or perhaps you’re being audited, and are trying to figure out how to avoid going through the process in the future. Either way, if you want filing your taxes to be relatively pleasant or pain-free the next time around, make sure that you don’t make these common mistakes in 2016.

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Forgetting to update your household status

Many people wrongfully assume that if they didn’t get married in the past year, they don’t need to change their household status. Marriage is only one of the many things that might require an update in status. For instance, did you have a child in the last tax year, or maybe even combine two families after a remarriage. Have your adult-aged children finally gotten a job, and begun filing as individuals? All of these things can affect your taxes, and you should take them into account when you file.

Going off of old numbers/forms

Taxes aren’t a static institution, and codes and laws are in a constant state of change. Tax rates, deductions, exemptions, and income cutoffs for benefits can change from year to year. Always be sure that you’re aware of the latest tax changes on both the federal and state levels. Also, be sure that you’re working with the most up-to-date tax forms.

Deducting too many business expenses

Deducting business expenses can be tricky – especially if you’re the owner of the business. Big businessmen like David Stewart need to be careful when they claim or they could be accused of tax evasion. Let’s say you run a business out of your home, and you’re trying to figure out what to claim as business expense. Your car and your computer can almost always be written off, but when it comes to other personal possessions, the lines can get a little blurred. Feel free to claim things that you mainly use for business, like office supplies and electronics. Don’t claim meals, certain travel expenses (your hotel room is fine, the live show you saw on your business trip isn’t), and other things that you aren’t 100% sure qualify.

Three Small Mistakes That Have Huge Tax Consequences

Most people only think about their taxes in the weeks leading up to April 15th, but they shouldn’t limit themselves to tax time! In May and June, you may be unpleasantly surprised to learn that there was an issue with your taxes, and you will be audited or asked to provide additional information. The worst-case scenario, however, is that you might be accused of tax evasion.

tax assessmentPlenty of professionals like David Stewart have dealt with tax evasion accusations and, as it turns out, many of them were practicing tax avoidance instead of evasion. Those sound really similar, but there is a major difference between them: intent. To try to make the two concepts easier to understand, we’ll go through some practices that the IRS would view as illegal.

Under reporting (or completely omitting) income

This is the most cut and dry practice of tax evasion, and it’s usually what springs to mind when people think of the crime. Some people work under the table and refuse to fill out W-9 forms and other proper paperwork to file their earnings. Some people may purposely state that they’ve earned far less money than they’ve actually gotten. Either way, always be honest on your taxes and make sure to report everything you earn.

Claiming personal expenses as business expenses

This can be tricky, because many expensive and important items like cars and computers could technically be purchased for both personal and work purposes. If you are unsure whether or not something could be written off as a business expense, it’s best to play it safe and only claim the things you’re 100% sure are used for your career.

Mislabeling transactions

Some people try to reduce or completely avoid income tax liability by labeling a business transaction as something it isn’t. Let’s say you’re the owner of a corporation, and you decide to label the payments that the corporation makes to stockholders as “interest” instead of “dividends” in order to claim less profit. To some people, that may seem like a great way to skirt tax laws, but it’s also a great way to get your business investigated by the IRS. Honestly claim every transaction your business or corporation makes throughout the year.