Understanding taxes can be daunting for many, especially with the complexities of tax laws. Even with the best intentions, individuals can unknowingly commit tax fraud. Identifying common mistakes can help you navigate your tax return safely and confidently. Here are five ways you might unintentionally find yourself at risk.
1. Misreporting income
One common mistake is failing to report all sources of income, including side jobs or freelance work. In Texas, like elsewhere, all income must be reported. Forgetting even small amounts can lead to discrepancies that raise red flags with the IRS.
2. Incorrectly claiming deductions
Deductions can significantly reduce taxable income, but only if claimed correctly. Misunderstanding which deductions you are eligible for, or how much you can claim, might lead you into trouble. Always double-check the requirements for each deduction you plan to claim.
3. Filing status errors
Choosing the wrong filing status can alter your tax liability. Whether you are single, the head of the household, or married filing jointly, your status affects your tax bracket and deductions. Ensure you select the correct status based on your current situation.
4. Mistakes in record-keeping
Accurate record-keeping is crucial. Incomplete or inaccurate records can lead to errors on your tax return. To avoid potential issues, retain receipts, invoices and relevant documents throughout the year.
5. Overlooking tax law changes
Tax laws change frequently, and failing to stay informed about these changes can result in unintentional errors. For Texans, it is essential to keep up with both federal and state tax law adjustments to ensure compliance.
Correcting tax mistakes
If you discover a mistake on your tax return, do not panic. The IRS offers options for amending your return. In Texas, you can file an amended return using Form 1040X. Correcting errors promptly can help mitigate potential penalties. For proper guidance and accuracy moving forward, you may want to seek help from a legal professional.