Avoid these common income tax mistakes in 2020

| Feb 6, 2020 | Firm News

Paying taxes to the IRS every year is an unpleasant task for everyone, but you want to avoid making the process even more difficult, and expensive, by making mistakes on your income tax returns.

While many errors won’t automatically trigger an audit, major or minor mistakes can cause headaches by delaying refunds until they are corrected. But other more serious missteps can create costly consequences.

Tax errors that come back to haunt you

The 2018 tax code overhaul created a lot of confusion and angst after the IRS issued new withholding tables for employee paychecks. Avoid potential issues related to the revision by:

  • Adjusting your withholding: Under the new withholding guidelines, most people receive more in take-home pay but see much smaller refunds than they were used to, while many ended up owing the IRS last year. If you were one of them, change your withholding by redoing your W-4 form.
  • Recording business expenses: If you are self-employed, you can deduct all costs related to your business. Not having accurate records or claiming deductions for items that don’t qualify open you up to an IRS audit.
  • Paying taxes on side jobs: Many people have side gigs to supplement their income. Some are paid in cash while others are considered independent contractors and are responsible for paying taxes themselves. Failing to report that income can cause significant problems.
  • Taking advantage of tax-free savings plans: Don’t lose out on opportunities to contribute to IRAs or 401(k) retirement plans that let you put aside pre-tax dollars for your retirement while lowering your tax liability.
  • Lining up a tax advisor: Paying taxes can be a complicated process, especially if you own a business or receive income in different states. Look for a tax preparer who is up to date on all current laws and can find ways to lower your tax burden.

What happens if mistakes lead to action by the IRS?

If the IRS believes the information on your return is incorrect and that you underreported income or claimed bogus deductions, it is in your best interest to consult an experienced tax attorney here in New York. Regardless of whether you are innocent, or your mistakes were intentional or accidental, your attorney will protect your rights and work to resolve the matter quickly and with the least amount of impact possible.

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