In our last blog post, we discussed some of the reasons to outsource your tax returns to a professional tax CPA, such as Peakview CPAs in Loveland. One of those reasons was to save you from costly mistakes when you do your own taxes. But just what are those mistakes you should be on the lookout for?
Peakview CPAs offers the best payroll services, business consulting, tax preparation, and bookkeeping services to customers in Northern Colorado. With over 50 years of combined experience, our certified public accountants (CPAs) are well-versed in the tax code and its changes and in preparing, processing, and submitting taxes for our individual and small business clients. Our mission is to make running your life and your small business easier by providing backend office services that, while vital to your small business running efficiently, are often better off being outsourced, freeing up valuable and precious time in your life. Below, we’ll take a look at some of the most common mistakes we see on tax returns. Contact us today to get started!
MOST COMMON MISTAKES YOU CAN MAKE ON YOUR TAX RETURNS
While this one is intuitive, you’d be surprised how many people file their tax returns late (and if you’ve been to the post office on April 15th, or the filing deadline for taxes, you’d know by the lines how many people wait till the last minute). In fact, the IRS states that 20% of taxpayers wait until the last week to file their taxes. While you can’t really blame people who owe the IRS money and want to hold onto it as long as possible, it’s still best to get your taxes done and filed as soon as possible. Your taxes are considered late if they are postmarked April 16th and beyond.
Filing by the deadline is important because as soon as you are late, the IRS will charge you interest on the money you owe. You can file an extension. However, many people mistakenly believe that by filing an extension, they won’t have to pay. An extension is an extension on the return, not on the payment. However, the IRS still requires you to pay your taxes by the deadline or face interest and penalties. When you partner with a tax CPA, they can help ensure your taxes are filed on time.
Filing the Wrong Status
Many people think that choosing the wrong status is hard to mess up. Again, thousands of people every year make this mistake. The choices are:
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er) with dependent child
For the most part, these choices are self-explanatory. The common mistake made here are the exceptions and situations that you may want to file separately as a married couple, or how you can claim head of household status, which can get you more deductions. The nuances are subtle here and the qualifications are buried in the tax code. Here, it’s best to consult a tax consultant if you believe you may have a situation where you should file jointly that could maximize your deductions and thus save you money.
With the preponderance of software programs used to calculate taxes, this error is decreasing, but it still happens, and it’s one of the first things the IRS looks for when it receives your returns. This is because if you made a math error, it can pay off big for the IRS. Or, you could make a math error that adversely affects you, causing you to pay more money than necessary. Even with software to help you, Peakview CPAs in Northern Colorado always recommends that you check your numbers. It’s super easy to make a data entry error as well, transpose numbers, and throw your whole tax return off. Software can’t correct what it doesn’t know; it only works with what it is given. Thus, check your work at least twice before filing your tax return.
In addition, we also recommend having someone else check your numbers because oftentimes our eyes skim over numbers and words we think we know, missing things. Our small business CPA firm would be more than happy to check over your tax return for you, as well as check over past tax-returns, to look for any errors.
Not Declaring All Your Income
365 days is a long time, especially if you lead an on-the-go lifestyle. From shuffling kids to and fro, managing your career, preparing good, wholesome meals for the family, and attending to what you want to do, you forget about things, such as that music show you did in January, that fence install you did for a small business owner you know, and those few freelance articles you wrote for your favorite magazine. All of this is income and should be declared along with your W-2 and 1099 income.
The people who you worked for report to the government that you worked for them, which means if you don’t report it, they can find out pretty quickly. This is also an easy error that people make that the IRS looks for so that they can get money because not only do you owe the IRS income tax on that income, but you will owe them interest and penalties as well once it’s found. This is another great reason to work with a certified public accountant who can help you remember all of your income sources.
Missing Out on Deductions and Earned Tax Credits
Missing out on deductions and earned tax credits are mistakes you don’t want to make, and, unlike the error of forgetting to declare income, the IRS will not be knocking at your door, telling you which deductions and credits you missed out on declaring. These are solely your responsibility to know and to use; if you miss out, you miss out, which could be hundreds, if not thousands, of dollars saved if you miss these repeatedly year after year. In fact, H&R Block reports that one in five tax-filers will miss out on a tax deduction for an average cost of $460. For most people, that’s a lot of money that could have been better spent elsewhere.
One of the reasons these deductions and credits are missed is because they often change year over year, making it hard for the average individual and small business to keep track of. Thus, this is one of the biggest reasons to partner with a tax CPA firm, such as Peakview CPAs in Loveland, so that you don’t miss out on deductions. Let’s face it, even if you did have the time to read up on the tax code and changes (which most of us don’t), you don’t want to. There’s almost nothing as boring as tax code, trust us (and we like this stuff). Here’s a list of some of the common missed tax deductions and credits:
- Medical expenses
- Teachers’ classroom supplies
- Home business expenses
- Property damage caused by a natural disaster that was officially declared as such
- Child care credits
- Other dependent care credits
- Higher education credits
- Earned income credit for those who qualify
Let this fact digest for a bit: the IRS tax instructions for filling out Form 1040, which is the most common form to fill out for all taxpayers, is 105 pages long. This fact alone should be a reason to head to your nearest small business CPA services for help with taxes.
Peakview CPAs wants to remind you that you work incredibly hard for your money, and you pay your fair share of taxes. You want to keep as much as you can for your own use and future. Thus, the goal of hiring a professional tax preparation service is to have a tax expert help you maximize your tax returns so you can keep as much of your money as you can. The professional tax accountants at Peakview take this job seriously, and we work diligently to ensure all of your tax deductions and credits are maximized and that none are missed.
ELIMINATE TAX FILING MISTAKES WITH PEAKVIEW CPAS IN NORTHERN COLORADO
While we can’t say we’re perfect, the tax accountants at Peakview CPAs in Loveland aim to do our best to ensure your tax return is correct and free from errors. As mentioned above, we work extremely hard to ensure we save you money on your taxes so you own Uncle Sam less. Whether you are a small business owner, or an individual, dollars matter, so it’s important to get things right the first time so that costly mistakes are avoided.
By partnering with a professional tax CPA, our tax planners will take the burden of tax preparation off your shoulders. You have enough to do in your busy life rather than spending an entire weekend trying to figure out your taxes. We make the process simple and easy. You can upload all of your documents to our secure site, sign online, and we can process your entire return without having you come into the office. You can even digitally sign as well.
In addition, we offer bookkeeping services, payroll processing, and tax and business consulting services to help advise you on future tax and business implications. Our small business CPA services aim to help your business be as successful as it can be by helping you on the backend with the required tax laws and by helping you save money. If you are in doubt, we offer a free CPA consultation to see if we’re right for you. Contact our Loveland accounting firm today to get started!