Every year, the IRS collects hundreds of millions of tax returns. However, the majority of Americans (90 percent), can’t answer basic tax-related questions.
Are you part of this group? Do you feel less-than-confident about your tax filing abilities? If so, keep reading.
Explained below are some of the most common tax issues you may face when filing your returns, along with tips on the best ways to avoid them.
Every year, a significant number of people do not file their taxes on time.
Whether they file late because they leave their taxes to the last minute, they’re unable to pay their bill (more on that in a minute), or for some other reason, this can result in some hefty penalties and other issues.
Keep in mind, too, that late filing can increase your chances of making mistakes on your returns. This is especially true if you’re rushing to get them done at the last minute.
To combat this issue, make sure you start filing your tax returns early.
As soon as you receive all your tax documents for the previous year, start looking for a tax preparer or preparation software to help you file your return. Keep an eye on the calendar, too, so you know when you need to have everything finished and filed.
In addition to filing their tax returns late, a lot of people neglect to file their taxes at all. Often, when people neglect to file their returns, it’s because they know they owe more money than they can afford to pay.
Not filing at all isn’t going to make the problem any smaller, though. The IRS has options set up for those who cannot pay their bill in full. For example, you can set up an installment agreement or file for an extension.
Filling Out Forms Incorrectly
You may file your return on time, but you could still end up facing tax issues if you did not fill out all of your forms in the correct way.
Whether you filed with the wrong status (married instead of single, married filing jointly instead of married filing separately, etc.) or made a math mistake when adding up your deductions, these kinds of issues can cause you to end up seriously over- or underpaying.
Make sure you use a tax preparation software or hire a professional tax preparer to help you avoid dealing with this.
Not Saving Your Returns
A lot of people make the mistake of not hanging onto their tax returns from past years.
Keeping records for the last few years will give you easy access to the information you need should any tax problems arise. The IRS says you should keep your tax returns for the last three years in most cases.
Set up a file in your filing cabinet specifically for your tax returns. You can also scan or save them on your computer in a special file if you prefer to go paperless.
Many people end up underpaying their taxes when they try to file them on their own. They may try to claim too many credits or deductions, or they may neglect to make quarterly tax payments (a must for those who are self-employed).
Whatever the reason, underpaying your taxes can lead to penalties, as well as garnishments and levies if you don’t pay what’s due on time.
To combat this, be sure to double-check your math before you file. Pay your quarterly payments on time throughout the year, too, if you’re self-employed.
On the flip side, some people pay more than they should in taxes each year. You may end up overpaying if you don’t take advantage of all the credits and deductions available to you.
To avoid facing this issue and giving Uncle Sam more of your hard-earned money than is necessary, make sure you carefully review all the potential credits and deductions you can claim.
Having a professional review your taxes can also help you ensure you’re not missing something important.
Garnishments and Levies
If you don’t comply with past payment agreements set up with the IRS, the agency may garnish your wages and/or place a lien on your asset.
If this happens, it’s important to work with a tax lawyer or another tax expert.
They can help you ensure the garnishments do not cause financial hardship for you and your family. They can also negotiate the terms of your agreement to make it as painless for you as possible.
Not Hiring a Professional
You can avoid all of these common tax problems by hiring the right professional to help you file your taxes.
If you work with an experienced, qualified tax preparer, he or she can make sure you file on time and fill everything out in the correct way. They can also protect you from interest and penalties and make sure you don’t over- or underpay.
Do plenty of research when looking for a tax professional. Consider what kind of work they do and the typical clients they work with most often.
Remember to start your search early, too. If you want until a week before the tax deadline, you’re going to be hard-pressed to find anyone, let alone someone who’s talented and qualified, who will be able to help you.
Conquer Your Tax Issues Today
There are definitely a lot of tax issues a person can face when they’re getting ready to file their returns.
However, if you keep this information in mind, you’ll find that it’s much easier to keep track of everything and feel confident when it comes to filing.
Do you want to learn more about tackling your taxes? Do you need advice on how you can reduce your final bill?
Whatever you need, we’ve got you covered. Head to the Money Tips section of our site today to get started.