By Gabby Phillips, Associate Director of Content, Women & Co.
As this year's April 17th tax filing deadline approaches, even the most organized among us may overlook some important details, and tax mistakes can be costly. With an understanding of some common mistakes and the steps you can take to try to avoid them, tax time can be less stressful.
1. Math Missteps
Basic arithmetic errors are a common mistake of taxpayers. Basic errors in addition and subtraction and numerical errors not involving calculations, like transposing digits (e.g., putting $56,087 instead of $50,687), can mean trouble. Be sure to closely review your tax documents before filing, whether they are self-prepared or prepared by a professional.
2. Contribution Conundrums
In recent years, Congress has added certain requirements when it comes to reporting your charitable donations. To accurately report your donations, keep acknowledgment letters from the organization you contributed to as well any bank records, like a canceled check, as proof, even for small donation amounts.
3. Capital Gains Guesses
To determine whether you have capital gains or losses, you need to know how much you originally paid for an investment -- your cost basis. Try not to lose track of investments you may have purchased long ago. Be sure you -- and your brokerage firm -- have your cost bases recorded correctly. Store brokerage statements in a safe place so you can reference them, if necessary, when preparing to file taxes.
4. Personal Expense Perjuries
Beware of mixing business with pleasure. If you go on a business trip, make sure any deductions on your tax return are only for the time you were actually conducting business. If a spouse, partner or friend joins you for a weekend following your business trip, the expenses you incur during that time should not count towards your tax deductions. Also, keep good records when you use your personal car for business.
5. Relaxed Recorders
April isn't the only time you have to think about your taxes and prepare the necessary records. If you are self-employed or have a fluctuating monthly income, keep careful records year round so you have less hassle at filing time. Also, keep tabs on your receipts, donations, health bills and other pieces of evidence all year.
Once you've avoided or corrected your mistakes and survived this tax season, don't fumble further! Monitor your income and any possible tax deductions all year and record them dutifully so you won't have to scramble for the next tax season.
Work with your trusted team of tax and financial professionals to ensure you are aware of all deadlines, have the necessary documentation and a complete tax return. Let the resources at Women & Co. help you prepare for your meeting. For more information about tax filing and common tax filing mistakes, visit www.irs.gov.
About the Author:
Gabby joined Women & Co. in May, 2009. Today, she oversees the development and distribution of all content and commentary for Women & Co. She is constantly searching for topics, content and contributors that are important, interesting and relevant to you, so Women & Co. becomes your go-to source for everything you want to know about personal finance. Gabby holds a B.A. from Colgate University, and brings experience to her role at Women & Co. from financial services companies such as Sanford C. Bernstein & Co., Merrill Lynch, and Citi.