Making mistakes when filing your taxes could come at a big cost. You could end up paying more in taxes than you need to if you are taxed on income that you should not have paid taxes on. Alternatively, if you underreport your income or fail to file your taxes, you could find yourself faced with penalties and late charges.
The good news is: Tax errors can be avoided. A New Jersey tax attorney can help you take steps to follow all applicable tax rules, make the most of your deductions and avoid penalties and consequences that can come from not paying your taxes as required.
Everyone’s tax situation is unique to them, which is why getting legal help from a tax lawyer on your personal situation is a smart course of action. However, while you should get the right legal advice from a professional familiar with your situation, you can also learn about some common errors to avoid. In particular, common tax mistakes that you do not want to make include the following:
• Not claiming all of your deductions or credits: Many taxpayers don’t have a detailed understanding of what tax credits or tax deductions they could be entitled to. There are some credits or deductions that you can take even if you do not itemize. Others require you to itemize your taxes instead of taking the standard deduction. You should understand different credits available to you, make an informed decision on whether to itemize or claim the standard deduction, and make sure you are getting the maximum credits no matter which approach you select.
• Not reporting all of your income: If you don’t report all the income that the IRS was informed that you have by W-2 and 1099 forms submitted by the people who paid you, this will trigger an IRS inquiry. You should also make sure that your calculations are accurate. Even an innocent math mistake that leads to underreporting could still trigger stiff penalties.
• Not understanding all of your tax obligations. Depending upon your specific situation, you may have obligations that go beyond just filing a tax return in April of each year. For example, taxpayers who earn self-employment income could end up needing to pay quarterly taxes. Individuals who have offshore investments may be required to file an annual Report of Foreign Bank and Financial Account and could be required to comply with FATCA. You need to know what your obligations are so you can follow IRS rules and not face penalties for failure to submit the proper paperwork.
• Missing the tax deadline: While procrastinating is natural when it comes to the big job of doing your taxes, if you don’t turn in your forms on time, you could end up owing late filing penalties and late fees for unpaid tax.
A New Jersey tax attorney can help you to avoid these and other common errors. To find out more about how you can avoid tax mistakes, seek legal guidance today.