Do you know how much these common tax errors can cost you?
Tax errors are a serious problem that can impact your life for years. They can cost you thousands of dollars and disrupt your financial security. Here is how to avoid these common tax errors and stay free of excessive monetary loss.
The Most Common Tax Errors Broken Down
While there are dozens of possible tax errors, we’ve broken down the five most common:
- Simple filing errors – People often write down the wrong Social Security numbers, misspell their names, or input the wrong address. These errors can cause the IRS to grow concerned about your claim or even file it improperly.
- Improper status filing – When filing, it is important to make sure you input the right status. For example, if you file single while as a married person, you are missing out on potential tax advantages.
- Simple math mistakes – There are a lot of numbers required when filing your taxes and it is very easy to make some rather silly mistakes. While online filing has decreased the occurrence of these problems, they can still happen, and they are always a major issue.
- Deduction errors – Filling out various deductions is an important way to save money on your taxes. However, doing them improperly can cost you. It may cause you to pay too much or lead to expensive audits with the IRS.
- Health care reporting mistakes – Properly filing health care is essential for your taxes. Failure to take into account this important aspect of filing can cause tax errors that may cost you hundreds, if not thousands, of dollars.
How Much This Can Cost You
The trickiest aspect of understanding these problems is how much money they are likely to cost you. That is often hard to gauge because there are so many variables at work. For example, when reporting health care improperly, the amount wasted will vary based on:
- The health coverage you had
- The number of months you possessed it
- The treatments you received during that period
- How much the health insurance paid for these treatments
- Whether the treatments were successful
For example, let’s say you neglect to report that you had health insurance for the whole year. You will suffer a penalty as high as $700 or more for your lack of insurance. That kind of extra money can be very expensive for most people to cover.
And what happens if you don’t supply the IRS with the proper bank numbers for your account? You likely won’t receive your refund for an extended period. There’s a chance your refund will end up in another person’s account, though it is more likely that your money will simply go nowhere.
Figuring out this problem will cost you many hours of calling the IRS, discussing the problem, and meeting with bank officials. In some instances, this could delay your payment by several months. However, more serious mistakes, such as improperly reporting your business expenses, can be even more problematic.
The Difficulties of Business Expenses
As mentioned above, improperly reporting business expenses can be a major hassle and cost you thousands of dollars. Let’s take rent as an example. If you work out of your home and have a special room where you work, you can write off many business expenses. For example, you can write off a portion of rent or mortgages you pay.
However, you can’t write off all of it because you still primarily use your home as a residence. As a result, you should only write off a portion of those expenses, instead of all of them. Trying to write off more than is allowable may trigger an audit. That audit can end up catching other problems and getting you in serious financial and legal trouble.
These tax errors make it important to find someone who can do your taxes quickly and efficiently. Professionals can help you avoid problems like these and finish your taxes successfully.