Tax season 2021: 9 costly mistakes to avoid
Tax season is in full swing. And if you're tempted to rush in filing your return, be careful not to make a mistake or you might miss out on a large refund, owe more taxes, or face an IRS audit. What mistakes can cost you money and nerves, the publication told USA Today.
Some of the most common mistakes taxpayers make are missing tax breaks, providing incorrect banking information, or charging late filings.
If you are expecting a refund but your basic personal information does not match, the IRS may notify you by mail within a minimum of four to six weeks that you must correct your mistake. Therefore, pay attention to the most common ones.
1. Tax incentives are not taken into account
Tax breaks are available to many Americans, especially those financially affected by the pandemic. The latest COVID-19 economic assistance package, signed by President Donald Trump on December 27, provides a special break for earned income tax credit, refundable tax credit for working individuals and low- and middle-income couples, especially those with children.
But the discount is not automatic. Taxpayers should be aware of the new option and take the time to look at profits for 2019 and 2020 and calculate the loan. They simply cannot assume they are not entitled to it.
The payout does not take place immediately. Therefore, people applying for a loan will have to wait, even if they apply immediately after the start of the tax season.
2. Late submission
It's tempting to postpone filing your tax return until the April 15th deadline, but making a foolish mistake can be costly. Although applying for an extension will give you more time, taxes will still have to be paid by the original deadline.
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Even if you cannot pay your tax bill in full on time, file a tax return and contact the IRS to start paying in installments. Refusal to apply may result in penalties.
The IRS has extended the tax season for Texas residents to June 15 due to recent winter storms.
3. The presence of tax fraud
Beware of unscrupulous people offering to prepare your taxes - they can steal important personal information from you. Scammers send emails on behalf of the IRS. A fake email refers to an "IRS electronic tax return" and verification of key information in an electronic file.
4. Invalid bank account numbers
Remember to double check your return account numbers. Taxpayers awaiting refunds should opt for direct deposit, which is generally the fastest way to receive money.
5. Change of name or wrong address
Have you changed your name or changed your place of residence? If you have legally changed your name with the Social Security Administration, make sure it appears on your tax returns. Non-compliance may delay the processing of your returns. Any correspondence and even your tax refunds may be sent to the wrong address if you do not provide a new one.
6. Unsigned forms
The unsigned tax return is invalid. In most cases, both spouses must sign a joint declaration. Exceptions can be made by military personnel or taxpayers who have a valid power of attorney. You can avoid this mistake by filling out your return electronically and signing it digitally before submitting it to the IRS.
7. Incorrect registration status
If you have been legally married for a year, do not forget that your registration status may change - to joint filing or separate filing of documents in marriage. There are other filing statuses that you might not have considered. For example, the head of the family or a widower, and they can give certain tax benefits.
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8. Lack of a report on all your income
People often do not realize that they have received taxable income, including unemployment benefits, rental income, or income from stocks, dividends, and interest. If such income is not reported on the tax return, it can lead to unpaid taxes with interest and various penalties.
A person may not know when they receive a new tax form, say 1099 or K-1, that they have an income column that should be reported on their individual tax return. It is very important to communicate your actions using these forms. The IRS usually receives a copy and can determine if there are any discrepancies in the records.
9. Mathematical errors
Mathematical errors are the most common among taxpayers. They range from simple addition and subtraction to more difficult calculations. Taxpayers should always double-check their calculations. This is where tax preparation software can come in handy as it does the calculations automatically.
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