Paying tax is hard enough without having to give the IRS extra. But then, people often end up doing just that when they make avoidable filing mistakes. Here are expensive mistakes you could be making, as well as recommendations on how to get around them.
You’re always late
Most people procrastinate filing their taxes until a few weeks before Tax Day. Then, they get into a frenzy of gathering receipts, remembering charitable donations, and assembling other important information. If you’re one of these people, don’t worry because you’re not alone.
The real problem comes when you’re still not prepared a few days to the D-day. Sometimes, you need to admit what you can’t handle alone. Hiring a professional will give you more peace than you realize.
You’ve been hit with multiple fines
The IRS issues two significant penalties. One for not filing your taxes — failure-to-file and not paying what you owe — failure-to-pay. Getting hit with one of these penalties is common and may be unavoidable.
But then, when you’re constantly paying interest on your tax, you need a different and fast approach. Quick action is necessary because the interest accumulates the longer you owe.
You can’t make the payments
If you’re unable to make your tax payments, you need a different kind of help. The first step is to file correctly and on time to avoid more penalties. The IRS is willing to set up relief for you more often than not, like an extension to pay or an installment agreement.
If your inability to pay was caused by mismanagement of your funds, you might also seek the help of a financial consultant. They can help you create a budget and system of spending to avoid similar scenarios in the future.
You’re being audited
Most professionals advise that you should never go into an IRS audit alone. Instead, hire a CPA to represent you. They can help you figure out why you’re being audited in the first place because it’s the first step to prevent future audits.
A CPA can also help you get around the current problems and find a favorable solution. Be careful, however, because working with the wrong CPA can be just as bad as representing yourself in an IRS audit.
Your filing status has changed
Your filing status has a significant impact on how you do your taxes. There are five statuses; single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent. Moving from single to married filing jointly, for example, means you’ll collaborate with your partner on your return.
Another kind of change is going from employee to self-employed. Self-employed individuals are subject to different rules, including the minimum taxable income and even the number of forms they submit. If your filing status has recently changed, consider getting some help until you adjust to the new rules.
You don’t know what you’re doing
Sometimes, you have absolutely no idea what you’re doing, and that’s okay. Statistically speaking, most people were average at math and arithmetic. Add bookkeeping, financial accounting, and all that to the mix, and you have a very confusing task.
If you find yourself confused, it’s better to hire an accountant to file your taxes for you. A more affordable option is to find a friend or family member to help you. You can also improve your knowledge of the subjects by reading up. Try starting from understanding the four basic types of bookkeeping: https://taxfyle.com/blog/the-4-types-of-bookkeeping-systems
