We know why you’re here.
It’s OK–fearing tax season is perfectly reasonable because when it comes to deductions, credits and filing status, there’s a lot to learn–and mess up. (Don’t shoot the messenger! Write to Congress!)
Our goal is to keep you far away from IRS auditors, while making sure that you pay as little as (legally!) possible.
We’ve broken down the top mistakes you should avoid point by point–translated from IRS speak–so you can sleep soundly at night.
1. Don’t … Keep Poor Records
Unless you have devastatingly simple finances (no real estate property, one salaried job, simple or no investments, etc.), then you’ll need to keep yourself organized for tax season, so you’re not left scrambling to find documentation or fudging the numbers on your return–that can set you up for an audit!
What to do: Make sure you have easy access to all of these records from the past year:
- Government confirmation of your return and refund from last year. Order a return transcript from the IRS.
- Records of charitable donations, including receipts. Charitable organizations often send out a year-end summary of how much you donated. If yours doesn’t, contact them to request a receipt or use bank statements or cancelled checks.
- Large medical or dental bills
- Records of business or job hunting costs
- Forms from your job(s) showing how much income you’ve made. You can request documentation of your salary from your HR department, if they haven’t sent it to you already. (If you have a full-time job, that will be your W-2. If you freelance, you’ll need 1099s from each client.)
- Purchases, sales and improvements to real estate property
- All actions in your investment and IRA accounts. Most online brokerages will keep records for you–just log in to download your documents.
Better yet, get yourself into a paperless filing system, such as linking your accounts in LearnVest’s Money Center, so that you have a searchable database of transactions and donations.
2. Don’t … Pay for an Accountant You Don’t Need (or Fail to Get One When You Should)
If you have simple finances–you are a salaried employee, and don’t hold complicated or high volume investments, for example–all you need is a couple of hours to do the job yourself through an online filing program.
(Bonus: You’ll save yourself a few hundred.) But if your finances are complicated, you risk losing out on deductions and credits that could make paying a professional worth it.
What to do: If you think that you should probably have an accountant, ask friends and family for a referral or visit AICPA.org to search for an accredited accountant.
Just be aware that you may be charged more for a rush job. If you cannot find one at the last minute, take our Ace Your Taxes Bootcamp, and make full use of our tax resources in the Knowledge Center to answer any questions.
3. Don’t … Choose the Wrong Filing Status
Your filing status (single, married filing jointly, married filing separately or head of household) determines how you treat many tax decisions, such as what forms you’ll fill out, which deductions and credits you’ll take and how much you will pay (or save) in taxes.
Select the wrong status, and it will trigger a cascade of mistakes–maybe even an audit.
On top of that, if you decide to file jointly with your spouse, this means you’re responsible for any errors or deliberate falsehoods on your partner’s return, so make sure that you’re comfortable with what it says.
What to do: Use our filing status flowchart to decide which status is right for you. If you’ve already filed with the wrong status, submit an amended return.
See the rest of the story at Business Insider