Tax can be a lengthy, tiring, complicated and even costly procedure. However, misfiling your income can be a serious crime which can end you up in jail. Hence, filing your tax in a proper manner is crucial to stay away from any trouble. Here are some common mistakes that you need to avoid the next time you file your tax.
1. Failing to report income
On purpose or by mistake, people tend to not report their total income for the year. If you do not report on purpose, it is a serious crime which can even imprison you. This is called tax evasion. Tax avoidance is the act of adjusting your income accordingly to reduce the income tax liability. For example, if you have sold your property this year and already have a high income tax liability, you can ask the buyer to pay next year rather than immediately so that tax for the sales proceeds will be calculated for next year. This is not illegal and hence can be used strategically for your benefit. You can get taxation services from tax consultants to help you with the strategic planning.
2. Missing deadlines
Timing is key to a successful taxation process. In each country there are specific dates on which you should file your taxes. Missing the deadline can cost you penalty and even delay any tax returns you are expecting. Since tax processing can be stressful and time consuming, start early. This will give you enough time to collect all necessary information and calculate your taxes.
3. Maintaining bad records
Not only businesses but individuals too are expected to keep proper records of their income sources. Just imagine yourself with a few days left to the deadline, sitting with piles of papers and bills. You do not want to fall into that position. So, maintain methodical records from the beginning to ease out you taxation process. This will even help your tax consultants to carry out their taxation services with no hassle.
4. Math and calculation errors
In the hurry of preparing your tax files, simple math miscalculations can be made. For example an income of 2500 can be recorded as 5200, an expense may be recorded as an income, wrong percentages may be used for calculations etc. these should be avoided since they can make a huge difference in your tax liability. If you forward these records, the relevant tax authorities will immediately bounce it back costing you a penalty fee and also you may find out that the correct tax liability is much more than what you have prepared for or that you should get more tax returns than you thought you should. To avoid such complications, you can use tax calculation software to calculate your liability correctly.
5. Filing status and name errors
You need to inform your tax authorities of any status change or change of name. That is, if you married recently you have to change your status from single to married. Or, if you were married before and now divorced with kids, you should file as single parent. This is very important since there are benefits given for some statuses, especially related to child care. If you are a single parent, they will give you allowances to take care of your kids. Hence don’t miss out on such opportunities to increase your tax returns. Also, make sure you inform them if you have changed your name. This mostly is relevant to women who change their surname after marriage.
These simple tips can save you a lot of time and money since even minor mistakes regarding tax can cost you a lot, not to mention the legal action they can take against you. So, be mindful the next time you file your taxes and stay out of trouble.