Avoid These Five Tax Mistakes

Financial tips

Avoid These Five Tax Mistakes

Posted by Infinite Wealth Advisors, LLC
3 years ago | February 27, 2017

15d390bc-03f5-4e1b-92f5-ddddc35d88f0Income tax audits are rare, but most of us definitely want to avoid them. Even if you’ve done nothing “wrong”, the scrutiny can be nerve-wracking and uncomfortable. Luckily, most IRS audits are not random, and are triggered by one of these five common factors. Avoid them, and you lower (but not eliminate) your chances of being audited.

Filing too early. Some people get in a hurry to file their taxes and get it over with, so they begin the process before all investment statements and other important documents have arrived in the mail. A go-getter attitude is admirable most of the time, but it could cause you to accidentally omit income from your tax forms.

Faulty math. Another problem is numbers that are entered incorrectly, so take the time to double-check your return.

Claim dependents correctly. If both you and your ex-spouse claim a dependent, the IRS computer system will catch the error. Often this will result in both of you being audited. Make sure you know whom is supposed to claim a particular dependent during any given year. Generally speaking, the dependent must live with you for at least six months of the year.

Lost records. Keep records of every single deduction that you claim. Holding onto records throughout each year will help you to enter the correct deduction amounts when you file your taxes the following spring. Keep in mind that reporting large deductions might be a cause for scrutiny, so you need to at least be able to prove them.

Filing a paper return. The error rate for paper returns is 21 percent, according to the IRS. Meanwhile, the error rate on electronically filed returns is a barely noticeable 0.5 percent. If you file a paper return, you’re more likely to make a mistake – and more likely to be audited.

Of course, tax planning should be performed all year long, not just at this time of year. Since many of your decisions can impact both your tax status and retirement fund, consult with us regularly. We can help you plan ahead for the decisions that best benefit you financially.

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