While helping my clients file their taxes this past tax season, I came across some common mistakes during this process. Although this previous tax season has ended, it is important to keep in mind these helpful tax tips for next year.
1 - Not Understanding Forms - It is important to read the summary pages and comprehend the forms involved in the tax filing process. It is important to understand what has been reported to the IRS. Also, it is equally as important to understand your taxable financial transactions, if any.
2 - Not Keeping Business Related Receipts – It pays to keep your receipts in order to have accurate information and to potentially have more to write off. Estimates are good but people tend to be conservative. You can potentially write off more if you know the actual amounts.
3 - Not Expecting to Make a Large Payment- If you know that you have to pay a large sum in taxes April 15th, it is to your benefit to spilt that payment up quarterly. It is more manageable that way.
4 - Receiving a Large Tax Refund – Although everyone likes to receive refunds when filing taxes, you should really no be receiving or owing any money. Make sure to check your W-4 to ensure that your exemptions are correct and you are getting the most out of your paycheck.
5 - Not Planning Ahead - If you plan ahead, you can save on taxes. After December 31st, not much can be done to save on taxes as opposed to preparing in the 4th quarter.
From a CPA’s perspective, these tips can help you through tax season whether you hire a professional or file on your own. However, it can be in your best interest to hire a professional in order to minimize your risk of an audit, to ensure your taxes are filed properly and make sure you are taking advantage of all potential tax deductions.