Common, avoidable tax errors can have serious costs
Many taxpayers rely on electronic software or a professional tax preparer to help them complete their income tax returns. However, in order for your return to be free of errors, you still must provide the correct information. As they say, “Garbage in, garbage out.”
There are other filing errors that too many taxpayers make, often unintentionally, that can result in costly fines, penalties and legal problems. Following are two that are easily avoidable.
First, some people don’t file a return because they don’t think they owe any taxes. The fact is that you don’t know for certain what you owe until you properly complete a return. Further, you may have a refund coming to you.
Every year millions of people miss out on money is rightfully theirs. Last year, taxpayers left almost $1 billion on the table in unclaimed refunds. If you don’t claim a refund for three years, the money goes to the U.S. Treasury.
Besides a refund, you may be eligible for an Earned Income Tax Credit. By not filing a return, you’re forfeiting that as well.
A second common unintentional error is forgetting to change your filing status. This may be necessary whenever there’s a change in your family. This can include getting married or divorced, having a child, becoming a widow or widower or having a child move away from home and no longer being your dependent.
If you’ve gotten divorced and you have children, it’s important to address both of your filing statuses during the divorce proceedings. According to the Internal Revenue Service, whichever parent has the child(ren) for the majority of the year (even if it’s one day and night more than half the year) can use head of household status. You may both be able to claim them as dependents, however.
Negligence like the above examples isn’t the same as tax evasion. However, the IRS can’t read your mind, so it may not be readily apparent what your intentions were. Therefore, if you find yourself under investigation by the IRS or other tax authorities, regardless of the circumstances, it’s wise to seek experienced legal guidance to minimize fines and penalties.
Source: Madison.com, “3 Costly Tax Filing Errors You Don’t Want to Make,” Dec. 25, 2016