Happy Tax Season, Y’all! As you work to prepare your 2016 return and as the 2017 tax year gets well underway, we wanted to offer some helpful tax tips! In our extensive experience here at Bryson Law Firm, LLC in resolving IRS tax debts owed, we find that it’s typically some of the same common mistakes that people have made to have ended up in need of our services. Here’s a list of the 3 most common tax mistakes we frequently see and some tips so you can avoid them yourself:
- Not Properly Filling Out your W-4
o Many people come to us with unpaid balances that were unpaid throughout the year simply because of inadequate tax withholdings from their paychecks. As tempting as it may be to receive the maximum from your paycheck, the late payment/failure to prepay penalties are not worth it- be sure to have enough taken out of your paycheck through withholdings.
o When you get a new job, become a newlywed, have a new baby, or find yourself in a new tax position, be sure to review your tax situation to confirm your withholdings are still appropriate.
- Not Keeping Tax Records
o Keeping expense information throughout the year in an organized and consistent manner can save you a lot of time, energy, and money; don’t wait until the end of the year to figure out how many business miles you traveled, how much you donated to charity, etc. Keep all relevant tax documents in a safe place year-round AND track your deductible expenses year-round. Try using a mileage tracker app, a personal accounting software to track expenses, save your bank statements and highlight the cancelled checks you know will be deductible expenses, etc.
o Additionally, even after the tax return is completed and filed, keep your tax information for the next several years in the event of an audit; many people come to us for audit representation and even though they had the proof necessary to claim the expenses at the time of filing the return; if they cannot reproduce them, the IRS has the ability to remove those unsubstantiated deductions/expenses and the taxpayer will typically then owe money to the IRS.
- Not Hiring the Right Preparer to File the Taxes
o Did you know that in 2016, 252 of the IRS criminal investigations initiated were for abusive return preparers and 495 were for questionable returns filed? In hiring someone to file your tax returns, it is crucial to hire the right person. Too many people come to us after receiving large refunds from fraudulently filed returns and subsequently being audited to pay it all back. The IRS will hold YOU responsible, NOT your preparer, for any incorrect returns filed.
o Be on the lookout for preparers who do not sign your return and instead mark it as “self-prepared”, preparers who guarantee you a larger refund than the competition or whose fees are based off the amount of refund, those who will not provide you with a complete copy of the tax return they file, etc.