Expensive tax mistakes to avoid

By Suba Iyer

For Five Cent Nickel

Published: Wednesday, April 2 2014 12:00 a.m. MDT

  • Don’t wait too long to file your taxes: If you wait too long, you might be in a hurry to file before the deadline and forget to claim all your deductions. If you file with an accountant, he might not have time for a thorough review. Do your tax preparation throughout the year by organizing your receipts, and start your return as soon as the new software hits the market with the latest changes.
  • Check auto-import numbers: Most major tax preparation software now has a feature to auto-import your W2 and investment tax forms. It is a very handy feature, but it is not always perfect — especially if you have a complicated W2 or 1099 forms. Check to make sure the numbers are in the right place and you are not double-paying your taxes.
  • Check different filing status to see which will be best for your situation: If you had a major life change in the year, like getting married or divorced, do the taxes using different filing status. One status might be better than another. For example, if you became a single parent, it might be beneficial to file as head of household instead of single.
  • Keep all your supporting documents in order: You should be taking every single deduction if eligible, but that doesn’t mean the IRS can’t question the deduction. Make sure to collect all the supporting documents and file them. It might be best to scan them and store them in cloud storage to avoid losing the documentation.
  • Report all your income, even if you didn’t receive the documentation: I had one of my contractors ask that I not issue her a 1099 so that she doesn’t have to pay taxes on it. It does not work like that. If you received income, you should report it no matter what documentation you receive. Make sure you keep the receipts for all the expenses you incurred for the job so that you don’t have to overpay taxes.
  • Check all your tax forms and income reports for errors: With ever-changing tax laws, sometimes companies make errors too. Make sure the numbers you receive in the tax forms tally with what you have on record.
  • Start your tax planning for next year right now: Many tax deductions will work only if you take advantage of it in the calendar year. By the time you are ready to file your taxes, it will be too late.
  • Have you made any mistakes in your taxes that cost you money? How do you make sure you have the maximum return that you can legally get? Do you use software, an accountant or do it by hand?

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