5 Tax Mistakes Are Losing You Money – Here’s How To Avoid Them
Are you paying more taxes than you need to? It’s a question many individuals and business owners ask themselves each year. Despite our best intentions, navigating the complex landscape of tax laws can be daunting, and even small oversights can lead to significant financial consequences. In this post, we’ll explore five common tax mistakes that could be costing you thousands – and more importantly, how to avoid them.
Mistake #1: Neglecting to Keep Accurate Records
One of the most common mistakes taxpayers make is failing to maintain accurate records of their income, expenses, and deductions. Without detailed records, you may miss out on valuable deductions and credits, leading to a higher tax bill. To avoid this mistake, make it a priority to keep thorough records throughout the year. As the IRS itself says, “good records will help you monitor the progress of your business, prepare your financial statements, identify sources of income, keep track of deductible expenses, keep track of your basis in property, [and] prepare your tax returns.” Accordingly, consider using accounting software or working with a professional to ensure your records are accurate and up to date.
Mistake #2: Overlooking Deductions and Credits
Many taxpayers overlook valuable steps that could significantly reduce their taxes. From education expenses to home office deductions, there are numerous opportunities to lower your tax bill. Take the time to familiarize yourself with available deductions and credits, and don’t hesitate to seek guidance from a tax professional if you’re unsure which ones apply to your situation.
Mistake #3: Failing to Plan for Taxes Throughout The Year
Waiting until tax season to address your tax liability is a recipe for disaster. Failing to plan for taxes throughout the year can result in missed opportunities to minimize your tax bill. According to Fidelity, “knowing where you stand well before the tax-filing deadline gives you time to adjust your current tax withholding and figure out what you can contribute to accounts like traditional IRAs, Roth IRAs, and health savings accounts.” Instead of scrambling at the last minute, make tax planning a year-round endeavor. You could consider working with a tax advisor to develop a proactive tax strategy while minimizing your overall burden.
Mistake #4: Ignoring Retirement Savings Opportunities
Retirement accounts offer valuable benefits that can help you save for the future while reducing your current tax liability. Conversely, failing to take advantage of these opportunities is a common mistake that could cost you thousands in unnecessary taxes. For example, according to Blackrock, “with a traditional individual retirement account (IRA) or 401(k) plan, you don’t pay ordinary income taxes on the money you’re contributing… this can reduce your tax expense in the year you contribute. You could further benefit later because your tax bracket in retirement might be lower than it is today.” Whether it’s contributing to a traditional IRA or participating in an employer-sponsored retirement plan, maximizing your retirement savings can have a significant impact on your tax bill.
Mistake #5: DIY Tax Preparation
While many individuals opt to prepare their own taxes to save money, this approach can backfire if you’re not familiar with the intricacies of the tax code. DIY tax preparation increases the risk of errors and oversights, potentially leading to audits, penalties, and higher tax bills. Instead, consider working with a qualified tax professional who can ensure your taxes are prepared accurately and efficiently. Taking this path is guaranteed to save you as much money as possible, while lowering your own stress.
Don’t Make These Tax Mistakes!
Do all of these common tax mistakes sound like a burden to avoid? That’s where we come in!
These tax mistakes are sure to lose you money, and there’s one easy way to ensure that you don’t make any of them. By seeking professional help, you can take the stress off your plate and ensure a pristine tax return. Most importantly, you’ll save money in the process!
Shore Financial has countless years of industry experience. We don’t make any tax mistakes, and with us, you won’t either.
Sound too good to be true? Well, you can book your FREE CONSULTATION right now and find out if Shore is the right fit for you! If you don’t like what you hear, you can walk away with no regrets and no money spent.