Accounting - Costly Tax Preparation Mistakes header graphic

Accounting - Costly Tax Preparation Mistakes

You should keep your taxes in mind every day of the year. Sure, it's a hassle, but dutifully recording those little tax-deductible things that happen day in and day out will save you a lot of cash in the long run. You'll need to keep documents, receipts, and bills from the entire year if you want to get a lot out of your itemized deductions.

April is a dreaded month for many people, all because it's tax month. Many people cram their tax return preparation, and this can result in many costly errors. In this article we take a look at some of the tax mistakes that millions of people commit. Avoid them, and you ensure yourself of a more peaceful tax month. You also get to save cash!

Typographical errors -- Misspellings (such as in Social security numbers) will cause delays in processing your tax return. It's more deadly when you transpose digits when writing cash amounts (e.g. writing $42,903 instead of $42,093). You can lose cash or earn the ire of the IRS with this kind of mistake.

Taking the standard deduction -- It's almost always better to itemize your deductions, as you're going to save more money this way. According to the Government Accountability Office, there are more than two million taxpayers who overpay their taxes by not itemizing. Overlooking deductions -- When you itemize your deductions, make sure you exhaust all possible deductions. The extra effort will be worth it. Important deductions sometimes overlooked by taxpayers include charitable contributions, medical expenses, traveling expenses, gambling losses, clean-fuel deduction, education expenses, and job expenses not reimbursed by the employer. You can even deduct your tax preparation expenses!

Math errors -- According to the IRS, basic arithmetic errors rank as the number one mistake of taxpayers. Sometimes, these errors just involve simple addition and subtraction! A great way to avoid math errors is by using tax preparation software.

Forgetting to attach documents -- Many people forget to attach essential wage statements to their tax returns. Don't forget the W-2 and 1099 forms from all employers.

Missing the deadline -- Very easy to avoid, right? But many taxpayers still miss the deadline, sometimes because they don't have the money to pay for the taxes. If you can't make the deadline, file an extension instead. Don't get charged a late penalty!

Forgetting about taxes when it's not April --  A word of caution: Once you've taken care to avoid these mistakes, don't ruin an otherwise perfect tax month by falling for the multitudes of tax scams out there, such as those which arrive in fraudulent emails. Also, if you've committed mistakes on your tax return (e.g. wrong filing status, typo error, wrong number of dependents), always remember that you can correct them even after you've filed the return. Just file the Form 1040X, which allows you to revise your tax return. (Read more on tax forms.) Last but not the least, you can minimize tax mistakes by hiring a tax professional to prepare your tax returns. You might also want to consult a tax advisor before tax month