Avoid These 10 Tax Mistakes

Everyone wants to avoid mistakes on their taxes. Going through an audit is stressful and if you make mistakes, you are more likely to be selected for an audit. If you are careful to avoid these tax mistakes though, you can feel more confident.

• Incorrect deductions

If you are going to itemize your deductions, make sure that you understand the laws regarding them. Some things may not be eligible or may only be partially eligible.

• Not starting early

Too many people wait until the last minute to file their taxes. They may be surprised to find that they owe money and not have that money available. Or they may find that there is something they cannot answer. Filing early ensures that you know what to expect and can get any questions you have answered.

• Lying about income

Self-employed people should make sure that they keep good records and report all income that they receive. The companies who pay them are also required to report this to the IRS so the IRSO will know if there is a discrepancy.

• Trying to avoid paying

Some people realize that they own money to the government and try to avoid paying by simply not filing. This is illegal and you can get in a lot of trouble for doing this.

• Not offsetting stock gains

If you sell a stock for a gain, then you will have to pay taxes. You can balance this out by selling a losing stock and deducting the loss. Most people don't do this though.

• Not adding to retirement savings

Your retirement savings are very important for your future, but beyond that, they can help you save money on your taxes in the short term. Certain retirement funds are tax deferred which means that paying into them will reduce your gross earnings.

• Not submitting all relevant documents

If you are itemizing deductions or have anything on your tax form that would make it stand out, you should make sure that you submit any supporting documents to avoid an audit.

• Withholding too much

Many people have too much money withdrawn for their taxes. Sure, they get a big refund in the spring, but they've given the government an interest-free loan. With a bit of fiscal responsibility, this money could have been earning them interest.

• Not keeping the receipts for your deductions

If you are going to itemize your deductions, you need to make sure that you keep your receipts as proof.

• Math errors

Surprisingly, many returns are flagged for audit each year just because of simple math errors.