Benjamin Franklin famously wrote, “In this world nothing can be said to be certain, except death and taxes.” And while the 2014 tax season is behind us, you can be sure that next year’s will come around again before you know it. The best time to start preparing is right now.
Becoming a tax expert takes years of study and practice, so it’s no surprise that most taxpayers make mistakes when filing their taxes, ranging from small miscalculations to major errors. Here are a few common tax mistakes to keep in mind as you begin early preparations for the next tax season.
1. Confused decimals. According to the IRS, the most common mistake filers make is miscalculating figures. Because it’s such a common error, the IRS will usually fix the mistake for you. However, if your math error results in an underpayment, you will be required to pay the difference owed, plus interest accrued on the amount. The best way to avoid this problem is to use a calculator rather than doing the math in your head, and to double- or triple-check all of your calculations before submitting your return.
2. What’s my status? While most of us can consider ourselves either “married” or “single,” several more factors can go into what status you use when filing taxes. Keep in mind the other possibilities as well, including head of household, qualifying widow(er), or even married filing separate. Remember, filing separately can significantly impact your tax return. Additionally, as of 2013, the IRS will recognize same-sex couples who are legally married as married for tax-filing purposes, even if the couple lives in a state where same-sex marriage is not recognized.
3. Changes in dependents. In order to claim a dependent, that person must be either a qualifying child or a qualifying relative. For many, the problem arises when their child reaches the age of 19 or, if a full-time student, 24. These are the specific ages that the IRS has deemed relevant when considering whether the dependency exemption applies. So, if you have a child who will be 19 or 24 on the last day of the tax year, it’s time to start planning for the possibility (though not necessarily the certainty) of one fewer dependency exemption on your return.
4. Think back to last year. If you owed this year, don’t forget to include it on next year’s return. Whether you paid in one lump sum or entered into a payment plan where amounts were withheld from your paychecks, these payments to the IRS should be deducted properly on your next federal return.
5. Keep your records. Don’t forget the importance of keeping records. Whether holding onto prior year records to support deductions in the event of an audit or remembering to file away all of the tax-relevant documents you collect throughout this year, the biggest mistake you can make is to throw away important records.
With so many things to remember, the last thing you want to have to do is scramble to get everything in order when April 2015 rolls around. Be proactive and start preparing now for a more organized tax season next year.