Tax laws are complicated. There are so many and they change all the time.
Every year, people who need to correct tax errors knock on our door for help. We are always there for them but we wish, as do they, the errors had never occurred in the first place. It would have saved them a lot of time and money!
Over the years, we’ve noticed that people tend to make 5 major tax errors:
1 ) Not taking bookkeeping seriously.
2) Late filing.
3) Missing or incorrect information.
4) Missing a tax break.
5) Filing under the wrong status.
Let’s look at each error in more detail in the hopes that we can learn from each other’s mistakes:
1) Not taking bookkeeping seriously. Your tax filing is only as good as your records; outcome correlates to input quality. It is one BIG way that poor bookkeeping negatively affects your business. Many people see audit-ready bookkeeping as daunting and tedious, but for seasoned bookkeepers, it’s a walk in the park. Cloud-based accounting software like QuickBooks Online allows us to deliver accurate reports from anywhere. One Source Services conducts our own audits before the IRS comes knocking on our clients’ doors.
2 ) Late Filing. The IRS estimates that 20% of us will procrastinate filing our income tax returns until a week before the deadline. That sets us up to possibly miss the deadline altogether if we run into any problems. Asking for an extension may allow more time to file, but taxes owed must be paid by the deadline or the IRS will charge interest. A good bookkeeper will keep your records tax-ready all year long and minimize the possibility of filing late. Plus, keeping good records all year will eliminate tax time surprises!
3) Missing or incorrect information. One of the most common mistakes is leaving a box blank or mistyping important information like your Social Security number. To avoid this kind of mistake, import last year’s return. This eliminates the risk of a typo because you’re not manually keying in your information. Or, you can always hire a professional to do it.
4) Missing a tax break. There are numerous tax credits and exemptions available that can lower your tax bill significantly. Make sure you don’t miss out if you qualify for credits like the Child Tax Credit or qualifying expense deductions. Think twice before taking the standard deduction; especially homeowners should see if their largest itemized deductions add up to more than the standard amount. One Source Services can help maximize your deductions!
5) Filing under the wrong status. Income tax rates and standard deductions vary by filing status: single, married filing jointly, married filing separately, head of household, or qualifying widow(er). For instance, married couples filing jointly are entitled to twice the standard deduction of people filing as single. Additionally, Joint filers are subject to different rules than Married couples filing separately. As an example, when filing separately, both spouses must claim either the standard or itemized deduction but not one of each. It sounds complicated but we can help!
Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. offers taxes planning and preparation services. We have qualified accountants and CPAs at your disposal to simplify your finances and help you find peace of mind.