When tax season rolls around, accountants are busy. They are working hard to process all of their clients’ tax returns, get all of the paperwork in order, mail out W-2’s for bookkeeping, and more. With only four months to process a year’s worth of work, it can be daunting and challenging. However, most certified public accountants (CPAs) love what they do and actually look forward to this time of year. Their experience and knowledge allow them to help their clients save money on deductions and tax credits, as well as save their clients time on the headaches of taxes.
Peakview CPAs is an accounting firm located in Loveland, CO. We serve all of Northern Colorado with small business CPA services, bookkeeping services, payroll, and tax advisory and business consulting solutions. Our mission is to see our clients’ small businesses grow and prosper, which we help by providing our accounting services. In our last blog post, we reviewed common mistakes made on tax returns. Here, we’ll cover the rest of the common mistakes we often see. Contact us today to get started!
MORE COMMON MISTAKES MADE ON TAX RETURNS
Receiving A Large Tax Refund
Many people can tolerate doing their taxes because they know that they will get a big refund after they file. They then go and spend this money on a summer vacation or on a special purchase they have been planning. Or, perhaps this money is saved, socked away somewhere in an IRA or elsewhere.
While getting a large tax refund back can make you feel good at the moment, the reality is that this is money that you earned throughout the year that Uncle Sam kept as his own. Then, when you declare your true income and deductions, the federal government realizes that you overpaid in taxes and refunds you your money. This is not money that is given to you by the government. Instead, in essence, you basically gave the federal government an interest free loan on thousands of dollars; whereas, you could have had that money in your pocket, earning interest or paying off debt.
Your goal is to break even at the end of the year, or pay just a little or get just a little back. While this can be challenging, your tax CPA can help you figure out the right withholdings based on your financials to do just that.
Incorrect Basic Information
Sometimes we can get all of the hard stuff right, remember all of our deductions and all of our paperwork, including all of our write-offs and receipts. Yet, when it comes to the small stuff, our “automatic” brain takes over, and we discover that it’s not so automatic after all.
Many people mess up their social security number simply by typing too fast. Plus, if you’re trying to remember your kids’ social, you may mess this up as well since you don’t often use them as frequently as your own. Besides social security numbers, people get their names wrong. This is because they go by a middle name and forget that legally their name is different. Or, they put a nickname down as well. You have to use the name that appears on your social security card exactly so that the government can match you up. In addition, many people misspell their spouse’s name or their kids’ name because they do only put down their nickname or their middle name. These little mistakes, while small, can cause the IRS to miss your tax return altogether, causing you to be late when you file an amendment.
Peakview CPAs in Loveland urges everyone to double and triple check their tax returns before filing. It’s crucial that these little mistakes from transposed numbers or usage of a nickname be caught to reduce the chance your tax return is rejected or missed.
Putting Pen to Paper (or Tablet)
If you are in a hurry doing your taxes because you procrastinated them like 20% of the American public, you can forget to sign your tax return. This is definitely one mistake you do not want to make because your tax return is now invalid. It’s as if you didn’t submit your return at all. If you did procrastinate mailing off your return, you will probably incur late fees and a penalty by the time the mistake is caught and corrected. Also, if you are married and filing jointly, both spouses must sign the tax return. If not, it will be invalid as well.
If you are filing electronically, you also have to e-sign. Again, in a rush, many people forget to take this crucial step. Usually, you’ll sign using a PIN number, which you will have selected when you efiled. When you partner with a local accountant in Loveland, such as Peakview CPAs, we double check that you have signed your tax return. Oftentimes, you will also sign a form, giving us permission to file for you. We do both at the same time, which helps us keep track as well.
Wrong Bank Account Information
With the advent of technology and direct deposit, we’re all trying to do what is easier, what saves time, and overall, what saves money. Thus, when it comes to receiving your tax refund, you can either elect to receive it by mail, or you can elect direct deposit into your bank account. If you elect direct deposit, you will receive your tax refund a lot sooner, often within a few weeks. If you elect snail mail, you can expect a longer processing time because the check has to be physically created and then mailed.
In the rush to get your tax refund (after all, the federal and state government has kept your money long enough), you may incorrectly enter your bank account information, or you don’t know which number on the bottom of your check is the routing number and which is your account number so you transpose them. Trust us tax CPAs when we say that this something you most definitely want to get right. Depositing into someone else’s bank account can be a sticky situation you’d rather avoid.
Having the Wrong Information
When a new change to the tax law occurs, most of the time, it’s minor. However, occasionally, there will be a more broad-spectrum change that can affect a large number of people. For instance, in 2017, major changes were enacted to the tax code that affected self-employed taxpayers. The changes involved what you can and can’t write off. If small business owners and those who are self-employed aren’t aware of these changes, they can misallocate funds by making a big purchase, intending to write it off at the end of the tax year, only to discover they cannot. Changes to deducting entertainment expenses were enacted as well.
Having an amazing small business CPA can help you keep abreast of the changes and advise you accordingly before you make such big purchases. This can save you hundreds of dollars in the long run.
Not Filing Your Taxes At All
Many people who have a big tax year believe it best to not file their taxes at all if they can’t pay. They think this will get them out of having to pay, as if they could hide from the government. In this day and age, let’s just say you can’t hide anything from the government anymore (or from anyone for that matter). It’s always best to file a return and then contact the appropriate IRS officials to set up a payment plan. Something is better than nothing, and it’s the good faith effort that will go a long ways in the mind of the IRS. You will be charged interest but consider this: if you don’t file your taxes, that can be considered tax evasion, which is a serious federal charge, one that could land you in jail for a lengthy period of time. Plus, tax evasion charges aside, you will at the minimum incur penalties and interest charges (at much higher interest rates), which can add up quickly.
CONTACT OUR SMALL BUSINESS CPAS IN LOVELAND TODAY FOR ALL YOUR TAX RETURN NEEDS
Peakview CPAs offers business CPA services, as well as services for individuals, for tax preparation and filing. In addition, we offer bookkeeping services, payroll services, and business and tax advisory services. We understand how hectic life can be, which is why we do our best to handle all of your tax services. We make it as easy as possible for you, by offering online submission of forms, as well as e-sign services. Our friendly and professional tax services include help with IRS audits, as well as reviews of your previous taxes. The IRS can legally audit you for up to three years for under-reporting your income, which is why a review is important. Additionally, we keep copies of all of your tax returns as well for up to three years in case you do need them.
We aim to have our small business CPA services be all-encompassing, which is why we offer bookkeeping and payroll services, in addition to tax help. When you partner with us for multiple small business financial needs, it’s easy to keep the communication lines open. You have all of your financials in one place, without having to worry about getting information to multiple places. Plus, our Loveland CPA team cares deeply about our clients, and we go the extra mile to ensure their needs are met. When you have a question, concern, or just need some advice, you can call us anytime. Contact us today for a free CPA consultation!