Common Mistakes People Make On Their Taxes
A Bookkeeper is a service professional who helps business owners and companies keep track of the money they earn and spend. They prepare your accounts, document daily financial transactions, prepare taxes and ensure compliance with applicable standards.
Failing to track reimbursable expenses, improper or poor record keeping, and improperly categorizing expenses are mistakes that you could make when attempting to do your bookkeeping and taxes on your own. It is advisable to seek professional bookkeeping services to ensure the proper functioning of your business.
To help you avoid some basic errors that could prove costly, Halal Bookkeeping and Tax has put together a list of the most common mistakes people make on their taxes.
1. They do not depreciate their assets
Many taxpayers are self-employed, business owners, or rental property owners. These types of taxpayers are allowed to deduct depreciation expenses for certain business properties. However, many taxpayers in this category do not take the deduction because they need to learn how to calculate the depreciation for the asset and oftentimes need to know which assets are depreciable. Depreciation deductions can make a big difference on a tax return. These types of taxpayers should consult a tax professional concerning the depreciation deduction.
2. Choosing the wrong filing status
Filing status determines taxpayers’ tax rates and certain allowances, deductions, and exclusion amounts. Sometimes, the best filing status is quite obvious, but not so much in other cases. For example, if your spouse recently died or you have recently separated or divorced, and you have children or other dependents, you may be eligible to file as either married or head of household.
Married couples also need to examine if it is most advantageous for them to file separately or jointly.
3. Forgetting to include interest, dividends, and stock sales
This common mistake happens when the taxpayer files early before all 1099s arrive. If there are multiple accounts that produce interest, dividends, or stock sales - even if the amounts are insignificant - some of those amounts are likely to be omitted from the return, especially if the return is filed early before all 1099s arrive in the mail.
Omitting these amounts generally results in the omission of income, which can lead to imposing penalties and interest on any additional amount owed that wasn’t accounted for on the return.
It is always best to wait for all 1099s to arrive before filing your tax returns.
4. Forgetting to include early withdrawals from retirement accounts
Usually, the taxpayer that makes this kind of withdrawal is experiencing some real financial hardship and often needs to remember to provide this information to their accountants or account for it when doing their taxes. Further, they fail to account for the 10% additional tax on early distributions before age 59 ½. Omitting such information from the return will generate a letter from the IRS stating the taxpayer owes an additional tax on that amount, plus the interest and penalties that have accrued on that additional amount until payment is made.
To avoid these and other mistakes, reach out to the experts at Halal Bookkeeping and Tax. We are a reliable accounting firm in Bossier City, Louisiana, specializing in bookkeeping, tax preparation, and business consultancy. Our team provides services in our local area and beyond by offering in-person and virtual meetings.
We serve clients across Bossier City, Shreveport, Haughton, Minden, Coushatta, Marshall, Jefferson, and the surrounding areas. Also serving clients virtually across the United States.
Get in touch today!