Most Common Mistakes People Make When Filing Their Tax Returns
Whether yours is a small or mid-sized business, filing tax returns is mandatory. Banks also often request copies of tax returns when approving a loan application. Filing on time may also reduce your chances of an IRS audit.
It’s a well-known fact that filing tax returns is a complicated matter and can be difficult for those without accounting experience. Due to lack of knowledge in the field, several people end up making various mistakes when filing their taxes.
To help you avoid these errors and potential IRS audits, we have compiled a list of the most common mistakes people make when filing their tax returns.
1. Incorrect accounting for income and expenses. A common mistake people make when preparing their taxes is incorrectly accounting for income and expenses. Tax laws vary depending on the type of income or expense. Hiring an accountant who knows your tax needs can help you correctly file your returns by utilizing all allowed tax rules.
2. Assuming tax software will find all deductions. Another common mistake often made is assuming that a tax software will be able to capture all your deductions. Many people assume tax filing can be automated. Yes, some of it can, but not all of it. There is more than one way to correctly prepare a tax return and not all “correct” methods provide the best results. This is why it makes sense to hire an experienced accountant who has the analytical ability to step back, see the whole picture, and spot possibilities that tax software doesn’t.
Tax software doesn’t offer comprehensive analytical options for various possible tax elections and scenarios. It does not have the human analytical ability. For example, we prepared a tax return that was just over an income threshold which would have cost the client thousands in taxes. We advised the client to look for additional legitimate deductions for a certain type of income. The client had additional legitimate expenses which they were going to ignore because they didn't think it would make much of a difference. This extra effort and human analytical experience saved the client thousands of dollars in taxes. This tax return wasn't extraordinary but the tax savings were.
3. Assuming money is saved by doing it themselves. Considering the potential accountants have in helping individuals and businesses reduce their taxes, the cost of tax preparation often stops people from hiring an accountant when it shouldn't. It doesn't make sense to pay $3,000 more in taxes just to save $300 in tax preparation fees. Are there circumstances where hiring an accountant may provide the same result? Certainly. Are there also circumstances where hiring an accountant saves you thousands in taxes? Most definitely.
To get your tax returns filed by expert accountants, reach out to Holyoak & Company. We’ll help you lower your taxes and manage your cash flow. Our mission is to add value to your business as a true business advisor. To learn more about services that we provide, please click here. If you have any questions about filing your tax returns, contact us by clicking here. Or click here to schedule an appointment.