One of the most stressful times of the year, for many people, is tax season. Whether people are filing a personal tax return or a business tax return, many will say that tax filing can be a stressful and confusing experience.
Sometimes people feel even more stressed because they might have to rush to file their tax return on time. What many people might not realize is that it is possible and quite easy to extend the tax filing deadline.
Still, a tax deadline extension will not do any good if people are filing their returns incorrectly. Here are a few tax filing mistakes to watch out for when filing a tax return.
Mistake 1 – Failing to file a tax return
In an article about filing taxes, this might seem like an obvious statement, but every United States citizen who earns over a specific amount of income in a year is required to file a personal tax return with the Internal Revenue Services (IRS). Additionally, those who operate a business, or who are self-employed will have to file a business tax return. Some people might mistakenly think they are exempt from filing taxes, for example, those who have moved abroad and are earning income in a foreign country, however, if they are still US citizens, people still need to file a tax return. Depending on the number of income people earn in a foreign country they may not have to pay US income tax, but they should still file a return to avoid having to pay any tax penalties.
Mistake 2 – Filing the wrong tax return
For people who are employed by an employer they will likely only need to file a personal tax return, however, those who are operating their own business or company, and those who are self-employed and are claiming business or operating costs will need to file a business tax return, as well as their personal tax return. To help make things easier during tax season those who are self-employed should be sure to keep a record of their business income and operating costs (for example equipment costs) to help make filing business tax returns easier.
Mistake 3 – Not claiming all deductions and tax credits
Many people might be surprised to learn that many expenses and costs they pay, either personally or through their business (if one is a business owner and filing a business tax return), can be claimed on their Federal income tax. There are many tax credits offered by the government. For example, parents who have adopted a child can get a credit for qualified adoption expenses, and high-level learning students (those in university, college or another post-secondary program) can claim an education tax credit for themselves, their spouse, or their dependents. People who have made a donation to qualified organizations can claim a tax credit for their donations. For people who are filing a business claim, there are also tax credits worth noting like the small business health credit, or the research tax credit. As well, it is worth noting that business owners and those who are self-employed can claim business expenses on their tax return.
Mistake 4 – Not double-checking the return
Sometimes it can be easy to overlook simple mistakes when filing a tax return, and many of these mistakes can easily be avoided by double their tax return before filing. People can help to ensure an accurate return by keeping records of business costs and expenses if filing a business tax return. For a personal return, people should be sure to keep records like charitable donations and medical expenses. People should be sure to check their tax returns thoroughly and may want to apply for a tax-filing extension to ensure their tax return is filed correctly.
About the author: Phyllis Sten discusses the benefits of filing tax extension forms 7004 and form 4868 in this article.