Tax time will be here before we know it! We talk an awful lot about what you need to do and have in order to file successfully. We don’t discuss enough what you should steer clear of. If you are penalized for any reason, you’ll end up owing more money. Take a look at the top four ways in which people accrue penalties. Be careful to avoid these pitfalls come tax season.
The cut off for filing a tax return is April 15th and it’s the same date every year. To avoid receiving a late file penalty, file before the 15th or request an extension if absolutely necessary. Tax season can be stressful, but starting early to get everything completed before April 15th will save you some money and frustration.
It’s not enough to just file your taxes by the 15th. You also need to pay your taxes by then as well. If you avoid paying what you owe by April 15th, you’ll end up owing a penalty equal to .5 percent of your due taxes. If that still is not unpleasant enough, you can end up owing up to 25 percent of your tax balance for nonpayment.
Most common on pen-and-paper tax returns, math errors can end up costing you. If you have poor math skills and end up paying less than the actually owed amount, the IRS can charge you interest on the remaining balance until it is paid off. Do yourself a favor and double check your math, file electronically, or hire an accountant.
Incorrect Charitable Donation
For non-cash donations, such as clothing or furniture, it’s imperative that you have proper documentation. When it comes to non-cash items that you plan to claim, make sure you have a copy of the itemized receipt. If you do not have proper documentation, you can be penalized during an audit for up to 25 percent.