Just about everyone fears a tax audit from the IRS, but why? If you haven’t done anything wrong, there may really be no reason to fear such an inspection of your financial matters. Maybe this fear comes from the knowledge that we aren’t always sure we’re doing our taxes correctly in the first place. Maybe it comes from the fact that the tax code is so bloated with exceptions, exemptions, and deductions, that it leaves most us wondering if we indeed have a clue as to what we are doing when we fill in those simple looking tax forms that sit beside the huge instruction booklet. Maybe it’s just that as Americans, we don’t like having our privacy invaded by “the man” and don’t appreciate the fact that he’s checking up on us and our private financial affairs.
Whatever the reason, an audit is something the majority of us would prefer not to have to deal with. But mistakes, voluntary or not, can sometimes lead us in that direction. Here are three common tax mistakes that people often make and ways to avoid them.
Being and Staying Organized
Keeping all your pertinent financial and tax information together throughout the year isn’t necessarily easy. However, it can make a huge difference when it comes time to file. For many, one of the major mistakes when it comes to taxes is not having all the documentation they need at the end of the year easily at hand to make their filing process more efficient. Not having the proper documents can lead to mistakes and errors that could raise a red flag when your return gets to the state or federal level.
But being organized is only half the battle to avoiding this tax mistake. Staying organized after the fact can be important as well. Keeping your tax information together and in a location that is easy for you to find can help you if you need to reference information from a previous year or have to deal with an audit and need to provide documentation for your tax claims.
What if you happen to misplace certain documentation relating to your taxes such as a charitable donation receipt or similar item but have a legitimate claim to taking the item as a deduction or credit upon your taxes? This might lead to another common mistake — failure to take the deduction that you are eligible for anyway.
If you have legitimately made certain purchases or are eligible for certain credits or deductions, but may not have or can’t find the necessary documentation to prove it, this doesn’t necessarily mean you shouldn’t attempt to take the deduction. While it might be like playing a form of roulette — taking your chances of not being able to prove the item if you are audited — it’s not as if you are illegally claiming something you didn’t actually deserve, and your conscience should be clear even if the tax man gives you a slap on the wrist.
Knowing When to Call it Quits
Pride can be a dangerous thing, and when it comes to doing your own taxes, it can sometimes get in the way of a properly completed tax return. Frugality can also play into the mix of tax preparation mistakes, preferring cost savings by completing a tax return on your own as opposed to paying a professional to do it for you.
Saving a buck can be a great aspect of doing your taxes yourself, and the pride that comes with sealing that envelope and mailing a tax return you’ve completed yourself off to the IRS can a be a wonderful feeling, but these factors can also be common and dangerous mistakes in the realm of taxes. Knowing when to pack it in, swallow your pride and spend a buck to get a professional’s touch upon your tax return can save you time and even money by avoiding costly mistakes. Doing so might also provide you with peace of mind knowing that you haven’t missed any deductions and that you have a professional on your side should you indeed be audited.
Anastacio Mindiola is an accomplished attorney and business owner. His company helps home and business owners protest property taxes in Houston and the surrounding counties. For more information on how you can lower your property taxes visit http://www.republicpropertytax.com.
- Some Tax Preparation Tips (goarticles.com)
- Make Filing Your 2010 Tax Return As Easy As Possible (2010tax.org)