Avoid These Five Tax Mistakes

Filed under: Financial tips

15d390bc-03f5-4e1b-92f5-ddddc35d88f0Income tax audits are rare, but most of us definitely want to avoid them. Even if you’ve done nothing “wrong”, the scrutiny can be nerve-wracking and uncomfortable. Luckily, most IRS audits are not random, and are triggered by one of these five common factors. Avoid them, and you lower (but not eliminate) your chances of being audited.

Filing too early. Some people get in a hurry to file their taxes and get it over with, so they begin the process before all investment statements and other important documents have arrived in the mail. A go-getter attitude is admirable most of the time, but it could cause you to accidentally omit income from your tax forms.

Faulty math. Another problem is numbers that are entered incorrectly, so take the time to double-check your return.

Claim dependents correctly. If both you and your ex-spouse claim a dependent, the IRS computer system will catch the error. Often this will result in both of you being audited. Make sure you know whom is supposed to claim a particular dependent during any given year. Generally speaking, the dependent must live with you for at least six months of the year.

Lost records. Keep records of every single deduction that you claim. Holding onto records throughout each year will help you to enter the correct deduction amounts when you file your taxes the following spring. Keep in mind that reporting large deductions might be a cause for scrutiny, so you need to at least be able to prove them.

Filing a paper return. The error rate for paper returns is 21 percent, according to the IRS. Meanwhile, the error rate on electronically filed returns is a barely noticeable 0.5 percent. If you file a paper return, you’re more likely to make a mistake – and more likely to be audited.

Of course, tax planning should be performed all year long, not just at this time of year. Since many of your decisions can impact both your tax status and retirement fund, consult with us regularly. We can help you plan ahead for the decisions that best benefit you financially.

Leave A Comment or Question

If you would like more information or have specific questions, please contact us using the following form. We would be happy to assist you.

This information has been provided by a licensed insurance professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting the insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax, trust and estate, or investment advice. Infinite Wealth Advisors is not an investment advisory firm.  Investment Advisory Services provided by NAMCOA® – Naples Asset Management Company®, LLC, a federally registered investment advisor, website: www.NAMCOA.com .