How To Avoid Tax Traps
Besides warmer weather, springtime also means tax season. In 2024, personal income taxes are due on or before April 17. It’s easy to feel overwhelmed especially as you have paperwork coming in from your employer, health insurer, or other sources. However, it doesn’t need to feel intimidating.
Brent Baron, Vice President and Relationship Manager at Workers Credit Union and experienced tax preparer, has tips to help you avoid common tax mistakes, which will make the process run smoother so you can get outside and enjoy the flowers.
Keep Records Throughout the Year
Planning for taxes is a yearlong process. It’s a smart decision to hold onto receipts and records of expenses to make the process easier during tax season. This can help you enter an itemized deduction if that makes sense for your situation. Keeping a planner or notebook with your medical appointments and other out of pocket expenses can become a useful tool when identifying what can be written off in your tax returns. If the itemized deduction adds up to more than the standard deduction, then having records from the past year will help you end up with more money in the end.
Don't File Too Early or Too Late
Some people receive the W-2 Form from their employer and file their taxes right away in January. Then, halfway through February, additional tax forms come through the mail and the person needs to amend their tax return. This is because they filed their taxes too early without allowing all the necessary forms to come in. On the other hand, if you file after the deadline, you’ll receive a filing penalty. The ideal time to file your tax returns is the middle of February. This allows filers enough time to submit with all forms on hand and includes a buffer for filing problems that come up, which can be fixed before the deadline.
Understand Your Filing Status
Your filing status can make a big difference in how much income tax you pay. Sometimes people qualify as the “head of household” and do not realize it. “Head of household” means you support a dependent paying more than half the cost of the support. There are plenty of online resources that can help you determine your filing status, like this NerdWallet article. Besides head of household, there’s also “married filing separately,” “married filing jointly,” “qualified widow or widower,” and “single.”
Check Your Work
Once you fill out your tax return, it’s important to go through it at least one more time to ensure your answers correlate with the questions correctly. When preparing taxes, Brent’s best practice is to go through them three times: initially, a second time to write down questions, and a third time to go back through again to make sure everything looks good. Checking your work can help you mitigate possible mistakes before submission.
With tax season upon us, it’s important to know that most mistakes are avoidable with advance preparation and understanding. If you have additional questions or need forms or information, visit your local CPA firm or www.irs.gov.