Ah taxes! We all hate to pay them, but we know we can’t avoid them. However, unless you’re a professional accountant, you may still be making some costly mistakes when you file your data. Did you know that a whopping 80% of Americans make a tax mistake that could cost them a lot of money? While, in comparison with other populations, we have an honest approach to our taxes – almost 9 in 10 Americans admit that cheating is unacceptable and don’t even consider doing it –, it doesn’t mean we get things right. In fact, these are the most devastating and unintentional mistakes that people make, and that can dramatically affect what they owe the IRS:
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Accidentally missing information
With over 56 million freelancers in the US, you’d think we know by now how to pay our taxes. Unfortunately, even freelancers, who need to get a little accounting know-how in their career, still make obvious mistakes. As a self-employed individual, you need to keep all your work-related receipts to be able to claim money back. You’d be surprised to know how many freelancers miss out by accidentally getting rid of some receipts or losing them. Another common mistake, for self-employed professionals, is to feel overwhelmed by the process and forget essential data. If you’ve recently started an independent career, you might find it helpful to hire an accountant to do your first taxes.
Making yourself suspicious by not disclosing information
If you have offshore assets, you need to be aware that the IRS is ending amnesty for financial accounts overseas. Indeed, in 2009, the OVDP – Offshore Voluntary Disclosure Program – was launched to help taxpayers come clean about their overseas assets. The program officially came to an end on September 2018. As a result, the rules have changed, but taxpayers can still disclose their assets to avoid a penalty. Do make sure you know and understand how to avoid criminal prosecution by coming voluntarily forward to the IRS.
Not keeping up with the deadlines
When was the deadline to file your federal taxes this year? If you haven’t filed already, you are too late! The federal extension deadline was October 15. Failure to meet the deadline is likely to attract a hefty penalty! Why do people continue to miss the deadline? The answer is all about your sense of organization. Indeed, you need to have all your documents together by October at the latest. However, you can file and pay sooner if you keep your finances organized. In other words, if you haven’t set a digital or physical folder at your desk with all your receipts and other documentation as well as calculations, you will struggle to meet the deadline next year.
You can slash what you owe, and you don’t even know it!
You can cut down what you owe the IRS. Indeed, using your 401k to stash money or saving for college, for instance, can let you reduce your taxes significantly. Check out the 12 most common legal strategies to save on your fees. For 2019, for example, you could keep up to $19,000 per year into your 401(k) account, which means less taxable income.
Are you paying too much taxes? From missing the deadlines to withholding valuable information, you could save yourself a lot of money by boosting your tax filing know-how.