Two things are certain in life; death and taxes. For some, filing a tax return can feel like dying a slow and painful death. Unless you’re an accountant, tax returns are never fun and rarely straightforward. They can be incredibly complex to fill out, particularly if you’re completing one on your own. As a result, people make so many silly tax errors that end up costing them.
Today, we look at the biggest tax mistakes to help you be more aware of them and avoid them in the future.
Making Math Errors
Possibly the biggest and most common mistake is making simple math errors. Calculating your tax involves adding up figures over a twelve month period. If you’re making the calculations by hand, then there’s always the chance mistakes will be made. As a result, you could over-calculate and pay more tax than you should. Or, you could under-calculate and pay less than you should. Needless to say, under-calculating is the mistake that will land you in the most trouble. Speak to any tax attorney and they’ll tell you they have hundreds of clients during tax season that are in trouble because they paid too little tax due to a counting error. To avoid any math mistakes, do the smart thing and download tax software that will add everything up for you – it’s far more reliable than using a calculator.
Paying The Wrong Type Of Tax
Another mistake that’s often made revolves around the type of tax you pay. This is a mistake that’s commonly made by small business owners or self-employed people. Sometimes, they will pay corporation tax instead of personal income tax, and vice versa. It all depends on what your business is legally registered as; a sole proprietorship, partnership, corporation, or LLC. If it’s a corporation, then you have to pay corporation and personal income tax. If it’s any of the others, then you pay tax on your profits as though it’s your personal income. Perhaps the most common error is a self-employed person paying corporation tax by mistake. This is common amongst people that have never filed a tax return before, and assume they need to pay this tax. To put it simply, unless you own a business that’s registered as a corporation, you only have to pay personal income tax. Similarly, if you’re in full-time employment, then you don’t file a tax return unless you’ve been earning extra money on the side.
Missing The Deadline
Finally, we have a mistake that’s far too common considering how easy it is to avoid. Many people will miss the tax deadline each year, and suffer as a result. Missing the deadline means you may be charged penalty fees that increase the longer you go without paying your tax. Worst case scenario, you may get a visit from some IRS agents too. Due to the way the tax year is set up, you can file a tax return well in advance of the deadline. There’s no excuse, set reminders on your phone and computer to get you to file your return before the closing date.
No one likes paying tax, but it’s a lot easier when you’re not making these mistakes!
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