Tax Season Approaches: Common Mistakes Costing Americans
The deadline of April 15 for tax filings or extension requests is nearing, raising awareness about frequent errors that can lead to financial losses for Americans throughout the year.
A report from GOBankingRates examines five tax-related mistakes that can cost taxpayers thousands annually.
These common pitfalls include neglecting available deductions, failing to track deductible expenses, and inaccurately reporting income.
IRS Scrutiny for Retirees
According to Christina Taylor, Vice President of Tax Development and Delivery at tax technology platform April, taxpayers focusing solely on their returns during tax season often overlook benefits and credits. This oversight can lead to the IRS reclaiming parts of their refunds.
Interestingly, last year, Americans overpaid roughly $3,200 in federal taxes on average, wasting billions in preparation time—around 6.5 billion hours.
Tracking Deductions
Many taxpayers fail to keep track of deductible expenses throughout the year, especially if they opt for the standard deduction instead of itemizing. Staying informed about what they can deduct—like cash or non-cash charitable donations, medical costs, and applicable interest—can help mitigate this issue.
Investment Income Reporting Mistakes
Another common error is misreporting investment income or stock compensation. Jennifer Kohlbacker, a CPA at Mariner Wealth Advisors, points out that taxpayers are sometimes not precise with their tax basis, leading them to pay excessive capital gains taxes.
Insufficient Estimated Tax Payments
For those with small businesses or the self-employed, making accurate estimated tax payments quarterly is crucial. Failing to do so may result in penalties. Significant life changes, like marriage or having a child, should prompt taxpayers to reassess their withholding information, often leading to adjustments in their take-home pay and refund amounts.
Common Filing Errors
Mathematical mistakes or typographical errors on tax returns can trigger reviews or audits by the IRS, potentially delaying refunds as well.
