When it comes to your taxes, there are a lot of things to keep in mind.
Here are the common mistakes people make when handling their taxes:
1. Not Knowing The Rules
This is one of the most common mistakes taxpayers make. They don’t bother to educate themselves on the tax rules and regulations, and as a result, they end up making errors on their returns.
2. Not Filing Tax Returns
If you don’t file your tax return, the IRS can penalize you. The penalty is usually 5% of the unpaid taxes for each month that the return is late, up to a maximum of 25%. So if you’re expecting a refund, make sure to file your return as soon as possible.
3. Filing Incorrect Tax Returns
If you make a mistake on your tax return, you may have to pay a penalty. The penalty is usually 20% of the amount of taxes owed. So it’s important to double-check your return before you file it.
4. Not Paying Taxes Owed
If you don’t pay the taxes you owe, the IRS can penalize you. The penalty is usually 0.5% of the unpaid taxes for each month that the payment is late, up to a maximum of 25%. So if you’re able to pay your taxes owed, make sure to do so as soon as possible.
5. Failing To Report All Income
The IRS requires you to report all income, whether it’s from a job, investment, or gambling winnings. If you don’t report all of your income, you may have to pay a penalty. The penalty is usually 10% of the unpaid taxes. So make sure to include all sources of income on your tax return.
6. Taking Unallowable Deductions
If you take deductions that you’re not entitled to, the IRS can penalize you. The penalty is usually 20% of the disallowed deduction. So it’s important to familiarize yourself with the rules for taking deductions before you file your return.
7. Failing To Pay Estimated Taxes
If you don’t pay your estimated taxes, you may have to pay a penalty. The penalty is usually 10% of the unpaid taxes. So if you’re required to pay estimated taxes, make sure to do so on time.
8. Filing A False Tax Return
If you file a false tax return, the IRS can penalize you. The penalty is usually 5% of the unpaid taxes for each month that the return is late, up to a maximum of 25%. So if you’re unsure about something on your return, it’s better to ask for help than to risk penalties.
9. Claiming Ineligible Dependents
If you claim dependents that you’re not entitled to, the IRS can penalize you. The penalty is usually $50 per dependent. So make sure that you can meet the requirements for claiming dependents before you do so.
10. Failing To Deposit Taxes Withheld From Paychecks
If your employer withholds taxes from your paycheck but you don’t deposit the funds with the IRS, you may have to pay a penalty. The penalty is usually 10% of the unpaid taxes. So make sure to deposit any withheld taxes on time.
11. Filing A Tax Return With Incomplete Information
If you file a tax return but fail to include all of the required information, the IRS can penalize you. The penalty is usually $50 per missing piece of information. So make sure that you have all of the required information before you file your return.
While these are some of the most common mistakes people make when handling their taxes, there are many others. So it’s important to familiarize yourself with the tax laws and make sure that you’re doing everything correctly. If you’re ever unsure about something, it’s always best to ask for help from a tax professional.
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