Tax Refunds & Advice

Before we get started, keep this in mind: you never want to make any mistakes when it comes to your taxes. If you do, you need to fix it at once. A small mistake left alone can lead to future problems that are more difficult to deal with. That being said, it is hard to go through life without ever making a tax related mistake. Fortunately, you can learn from every situation so that you don’t screw up twice.

Here are several tax mistakes that you don’t want to make more than once:

1. Not tracking your deductions. This is a big tax mistake, and if you make it once you will realize how stupid you were. When you don’t track your deductions you end up paying the IRS more than you should in taxes. Who wants to do that?

2. Filing your own return when you don’t know what you are doing. This may be the biggest tax mistake. Unfortunately, many people make it time after time. If you are lost and have no idea what you are doing, it is time to call a tax professional. Quit making the same mistake and pay a pro. This will put your mind at ease.

3. Lying. This is a mistake that you never want to make. You should never, ever lie on your tax return. If you do you are asking for a lot of trouble with the IRS. It is important to be 100 percent honest, 100 percent of the time.

If possible, avoid these tax mistakes altogether. If you have already committed one or all of them, do what you can in the future to make sure they do not occur again.  

If you are self-employed you are probably familiar with schedule C. Even though you may know a lot about your tax situation and what the IRS expects from you, filling out and filing schedule C is not always the easiest thing to do. Here are a few schedule C problems to avoid:

1. Don’t forget to track your income and expenses. Many self-employed professionals get so excited and caught up in their business that they forget about this detail. It is important to have a flawless system for tracking income and expenses. Any mistakes or omissions will throw your schedule C out of whack.

2. Know which deductions are for business and which ones are not. Take for instance a freelance writer who purchases a new computer. Even though you may use the computer for business, if you also use it on a “personal basis” you cannot deduct 100 percent of the purchase price, maintenance, etc.

3. You need to keep great records in case you are audited. A tax audit is not something you ever want to go through, but every year millions of Americans face this scenario. The IRS is aware that self-employed professionals are in a unique situation, so they will be watching you. Be sure to keep accurate records in an easy to understand format. When you have documentation to backup your claims you never have to worry about a tax audit ending badly.

If you need to file a schedule C it is important to avoid the problems detailed above. These potential issues wreak havoc on many taxpayers every year. 

There is nothing wrong with planning for the future. In fact, this is something you should do if you are interested in living a good life and having your finances in check at all times. Along the way, you should consider the tax implications of all the moves that you make. Remember, many of the decisions that you make are going to change your tax situation. Do you know what some of these tax changing decisions are?

For one, buying a home is a big step in your life. This is true from both a personal and financial point of view. To go along with this, your tax situation will also change. For example, if you take out a mortgage you are now able to deduct the interest. How does that sound? If you are like many, this should greatly help your tax situation.

What about retirement accounts? If you are like most you are saving for the future. Be sure that you know the tax implications of every sort of retirement account you are getting involved with. This includes everything from your 401k to Traditional and Roth IRA’s among many others. If possible, speak with a qualified CPA who can give you advice on which retirement vehicles offer the best and most tax benefits.

When planning for the future make sure you think about how your tax situation will be effected. It is very important to make the right decisions so you are bettering your tax situation as opposed to causing problems for yourself. As noted above, it is a good idea to check with a CPA if you have any questions.