Income Tax Mistakes Can Hurt
Since all Americans have to file taxes, people often get busy about this time of year as they rush to meet the April 15 deadline for filing your Federal income tax return. Most Americans have a refund coming, so there’s no real hurry, but you can’t get a refund until you file. Since most of us are eager to receive our return as quickly as possible, we can often get in a bit of a hurry and being in a hurry leads to income tax mistakes.
Income tax mistakes can lead to overpaying taxes, underpaying taxes, or leaving you without a valid return at all, which means you won’t get your refund until you correct the return and resubmit it to the IRS. No one wants to do that, so it’s best to be aware of the simple and often obvious income tax mistakes that people frequently make and try to avoid them, if possible. Below are a few of the most common income tax mistakes and how you can avoid them.
Income Tax Terms are Often Misunderstood
Income taxes and the underlying tax code in the United States are certainly complicated, and many taxpayers really don’t know much about the law or the process of collecting and paying income taxes. For the most part, they don’t have to; their tax preparation is handled by software or perhaps a professional tax preparer, and all the taxpayers have to do is provide the appropriate information in order to file their annual tax return. For most people, the only thing that really matters is the amount of the income tax refund that’s coming back to them.
That’s fine, as far as it goes, but there are some things that do require attention from taxpayers from time to time, and due to the complexities of the tax code, a lot of people misunderstand relatively common terminology related to income taxes. Most of the time, this doesn’t matter, but as with most subjects, the better informed you are, the less likely you are to get into trouble. When it comes to income taxes, you’ll find that the better informed you are, the greater the likelihood that you’ll be able to find a way to save money and that means a larger refund. That’s always a good thing.
Below are a few of the most commonly misunderstood income tax terms. Continue reading
Income Tax Deductions – Don’t Overlook These
We all hate paying income taxes, but one of the nice things about our tax laws is that they do allow us to pay only on our net income, rather than the gross. That makes for an interesting game, as taxpayers are then put in a situation where they can actually benefit from taking time to find income tax deductions that they can apply to their gross income in order to reduce their taxes.
What few people realize is that the US Tax Code has an incredible number of things in it that the average taxpayer could be taking in the form of income tax deductions if they only knew about them. The problem, of course, is that there’s really no readily available list of income tax deductions that people can look over in order to decide if they might be useful to them specifically.
Common income Tax Deductions
We have written before about the importance of income tax deductions. After all, deductions are an important factor in determining how much you are going to pay in income taxes. The more deductions you can take, the lower your taxable income and thus, the lower your income taxes. While there are hundreds, and perhaps thousands, of legitimate deductions that taxpayers may use to lower their income tax bill, most people make use of only a handful of them. In a recent post, we wrote about some unusual income tax deductions that people have used over the years, and now we’ll turn the tables a bit and focus on some of the most common deductions that American taxpayers take.
Charitable Donations – Americans remain a charitable lot, giving money to churches and nonprofits on a regular basis. These donations, whether in the form of cash or goods, are legitimate income tax deductions, though it’s advisable to keep accurate records of your donations. If you regularly write a check to your church, be sure to make note of it. If you donate used goods to a charity, be sure to get a receipt or document the donation in some other way.