Income tax season is in full swing, and no doubt you’re ready to get the arduous task behind you. But don’t get in too much of a hurry. Some mistakes can cause delays in processing your return. Others might cost you money when you overlook valuable tax breaks. Take the time to not only double-check your return, but also analyze your tax situation and reduce your tax liability for next year!
Making simple mistakes. The most common income tax errors pertain to incorrect Social Security numbers, failing to sign your paper return, or failing to change your name after marriage or divorce. Simply proofreading your return can usually prevent these errors.
Self employment and home business mistakes. If you run a business from home, or work as an independent contractor, you might be eligible for a variety of tax breaks. However, the rules regarding this type of return are quite tricky. Consult a skilled tax professional, or at the very least, upgrade to a tax software geared particularly for your filing status.
Don’t overlook opportunities to reduce your taxable income. If you have money deducted from your paychecks for certain employer-provided benefits, you might be able to reduce your overall taxable income. Look into benefits like life insurance, disability insurance, and flexible spending accounts. These options offer valuable benefits you might need anyway, while helping you out with a tax break.
Don’t pay too much throughout the year. If you always receive an income tax refund in the spring, that just means you’re overpaying through payroll deductions. If you reduce your withholding slightly, you can put that money to better use all year – for example, your retirement savings.
You aren’t contributing to your employer-provided retirement plan. Everyone needs to save for retirement, and contributing to an employer-provided retirement plan (like a 401k) can actually earn you a tax break. Contribute as much as you can, to take full advantage of the tax incentives (plus, you’ll be glad you did when you reach retirement).
Have questions about your retirement plan contributions, or finances in general? Give us a call! We can help you prepare for a more stable future.
Portions of this article have been excerpted from “Tax mistakes everyone makes – and how to avoid them” video on msn.com, a separate entity from LPL Financial.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.