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Tax Pitfalls To Avoid

Tax problems occur because of not following the correct procedures. Get to know these common tax mistakes and the ways to avoid them.

No one wants to experience tax problems that could cause the IRS to initiate an audit. Big mistakes come with significant consequences. However, human error, miscalculations, and missed opportunities can also cause stressful issues.

G&R Bookkeeping Services LLC understands how easy it is to make a costly tax mistake without professional assistance. As a leading accounting and bookkeeping firm in Cape Coral, FL, we share the most common tax issues to avoid in this article.

Common Tax Problems

1. Insufficient Recordkeeping

As a taxpayer, you must report details of your transactions using the IRS Form 1040, Form 8949, or Schedule D. Sufficient recordkeeping makes completing these forms straightforward and more accurate.

Records include documentation that shows your income, expenses, and financial transactions, such as investments and property ownership. The documents will help you keep track of your business, income, deductible expenses, and basis in property.

2. Forgetting Deadlines

The tax return deadline is April 15th unless the day falls on a weekend or holiday. To avoid penalties for late filing, individual taxpayers must file their taxes before that date unless they request and are approved for an extension.

Another deadline to remember is December 31st. You can calculate most of your tax deductions, like student loan and mortgage interests, through that date.

3. Not Knowing About Current Tax Cuts

Tax laws are ever changing, and the confusion over cuts contributes to tax problems. Tax cuts put in place by Congress years ago have expiration dates. Without knowledge of current tax cuts and when they will likely change, you severely miscalculate how much you owe the IRS or what the agency owes you.

How To Avoid Tax Penalties

IRS tax penalties range from failure to file on time to underpayment of estimated taxes. The government agency charges interest on all penalties, so it’s crucial to file taxes accurately and on time to avoid costly charges.

Here are tips to prevent incurring avoidable tax penalties:

  • File your tax returns before the deadline each year.
  • If you owe taxes, pay them in full by the tax return deadline to avoid the 0.5% penalty of the tax you owe per month.
  • Pay taxes to the IRS during the year through tax withholding on every paycheck or quarterly estimated payments.
  • Maintain accurate records.
  • Contact the IRS immediately if you suspect someone is using your Social Security number for identity theft.

Avoid Tax Issues With Expert Assistance

It’s easy to unintentionally create tax issues for yourself, whether you’re filing taxes as part of an independent organization, sole proprietorship, or a working-class individual. The best way to avoid complications with the IRS and state government is to work with accounting and tax preparation experts with the tools and know-how to prepare accurate tax returns.

G&R Bookkeeping Services LLC and its knowledgeable and trusted team will take the guesswork out of filing personal and company income taxes. We have years of experience helping clients in the Cape Coral, FL, area and know how to avoid tax penalties for our clients. Request a consultation with G&R Bookkeeping Services LLC at (239) 424-9296 and avoid tax problems.