Money

5 Common Tax Mistakes That Can Cost You Major Money

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When tax season rolls around every year, I feel especially blessed to have my mother around. As an accountant for longer than I’ve been alive, she’s able to help me get my filing done with the least amount of stress and hassle possible. Obviously, not everyone is lucky enough to be born with a mom who can do taxes in her sleep and the whole process can quickly become overwhelming for many people. It’s all too easy to make simple mistakes that cost you more than you really need to pay. 

One helpful tool provided by the Internal Revenue Service (IRS) is their handy Interactive Tax Assistant. Whether you’re filing yourself or enlisting the help of a tax preparation company, it’s always a good idea to double check any questions you might have with the Interactive Tax Assistant search function. With that in mind, we gathered some of the most common problems people face when they sit down to submit their taxes each year. Take a look to see what mistakes you should avoid while filing taxes to make sure you don’t end up paying way more than you should.

1. Selecting the wrong filing status. 

There are five statuses to choose from when you fill out your tax forms: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with a dependent child. The one that trips people up most frequently is the head of household. To qualify for that status, you need to be unmarried, responsible for more than 50 percent of the household costs, and, most importantly, claiming at least one dependent. Essentially, this status should mainly be used for single parents. 

2. Claiming a charitable donation without proof.

Donating to charities is always admirable, but not always an entirely selfless act. There’s nothing wrong with expecting a little kickback for your good deed when tax season comes around. That said, you need to make sure the organization you donated to not only supplies you with proof of that donation, but is also listed as a tax-exempt charity by the IRS. You can search for any charities you’ve donated to on the IRS website.

3. Not paying when you file an extension.

This is one of the most confusing issues when it comes to getting your taxes done on time. Filing for an extension only gives you more time to submit your information, not more time to pay what you owe. Of course, you usually need to complete the forms to know exactly what you will need to shell out for your taxes, so this seems a little counterintuitive. If you have a rough idea of what you’ll owe and just need more time to get everything sorted, though, you should pay that while filing for the extension in order to avoid interest and penalties. 

4. Paying someone for help when you can get it for free. 

We aren’t just talking about bugging your accountant friends to look over your forms before you submit them. The IRS actually offers free assistance with the Volunteer Income Tax Assistance (VITA) program to those who qualify. Certified volunteers are able to provide assistance with preparation for individuals who make less than $55,000 annually, those who have disabilities, or those who speak limited English.

5. Also paying a fee to file.

We understand that most people like to use programs like TurboTax or companies like H&R Block to make filing as stress-free as possible. However, those options also typically come with a fee for helping you out. If you tend to have a fairly simple claim, you can prepare and file your information online for free on the IRS website. They separate the forms for those who make above and below $66,000 annually — those who make less are able to use a software that guides you through both federal and state taxes; those who make more will need to know how to file with only basic guidance and will need to do their state taxes separately. 

Keeping in mind that most people file online in one way or another these days, it’s also important to double check that all of your information has made it through each step of the way. You don’t want a glitch to end up causing more frustration for you down the line.

Here’s hoping that everyone has a nice refund to look forward to this year!

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