Tax filing is an inevitable yearly task that often carries with it a significant amount of anxiety. However, you can avoid a lot of the stress by being aware of and avoiding some of the most common mistakes that taxpayers typically make. To escape unwanted attention by the Internal Revenue Service, eschew these oversights and heed the following tax filing suggestions.
Double-check the Details
Small errors such as mistakes entering your Tax ID or Social Security number while tax filing can cause big problems when your forms are being processed. To avoid this difficulty, carefully double-check the spelling of names and the accuracy of numbers on your tax returns. It is useful to compare your previous year’s return with the one that you are currently completing. Tax preparation software can assist you in eliminating some of the problems. However, you will find it even more effective to work with a tax professional.
Report All Your Income
All the income you receive, except for inheritances and some gifts, is taxable. Usually, you will receive a record of the income you have received on a W-2 or Form 1099. Report all of the income on these forms or the IRS will discover the discrepancy and investigate. Keep in mind that you are also obligated to report income for which you haven’t received forms.
Properly Report Gains from Investments
When reporting investment gains, you have to know the sale price as well as the cost basis to calculate your net loss or gain. Circumstances such as fees, commissions, and stock splits may adjust the cost basis in your favor. Although financial institutions may provide you with a Form 1099, all the relevant information for your taxes may not be included. So keep meticulous records of investment sales and purchases on your own.
Claim Only Supported Deductions
It is an error to claim large deductions on your tax form that you are unable to document. Be sure that charities to which you donate to are recognized by the government as tax-exempt. And always keep official records of any contributions that you make.
For more advice on tax filing, contact Jasema Capital.