Thinking of preparing your own income tax return this April? You might want to reconsider. Even the slightest oversights might mean hefty fines and penalties that could have been avoided. Watch out for these four mistakes before hitting the “submit” button.
#1 Neglecting to report all of your income.
Whether it’s your regular paycheck, a side gig, gains that you’ve made on the stock market or interest earned from deposits in the bank, you need to account for all of it in your tax return. If you don’t, the IRS may come knocking. Every time you make at least $600 in income working as an employee of any description, you get a 1099 form stating what you’ve made. Technically, you should also record smaller chunks of income for which you don’t get a 1099.
#2 Guessing what your deductions are.
Back up every attempt at a deduction with documentation like receipts or logs. If you attempt a rough estimate at what your deductions should be, you could trigger suspicion — especially if the sum you claim is high for your income level, or if it’s a convenient round figure.
#3 Automatically rejecting the idea of itemizing.
Most tax filers choose to take the standard deduction, rather than itemize. But, this doesn’t mean that you shouldn’t itemize — it really depends on your specific circumstances. If you have many legitimate deductions to make because you pay a great deal of mortgage interest, for example, itemizing may work in your favor.
#4 Procrastinating filing your return.
Preparing your taxes is a complex process. If you’re self-employed, or if you need to itemize, it man only get worse. Don’t rush through the process, as mistakes can be costly. Take the time to file your taxes well ahead of the deadline. If you need extra time, you can always file for an extension and avoid the late filing penalty, which can add up to a whopping 25% of the original tax amount.
Whatever you do, don’t skip filing altogether! At Magone & Company, we’re here to help. Give us a call at (973) 301-2300 for assistance in resolving any tax issues that come your way.