To put it simply, taxes are complicated. Unless you are among those who earn a living working as an accountant, you probably make at least a few guesses or estimates when filing your taxes over the course of your lifetime.
In some instances, however, errors you make when filing your taxes are crimes, and you may find yourself in trouble for making certain mistakes, even if there is no ill intent behind your actions. Your chances of avoiding inadvertently committing tax fraud improve considerably when you learn to recognize some of today’s most common tax errors. These include:
Claiming tax credits that do not apply to you
A good way to get the Internal Revenue Service to take a second look at you is to claim a tax credit for which you are not actually eligible. For example, some lower-wage earners can take advantage of the Earned Income Tax Credit, but in order to do so, your income must fall below a certain level. If it does not, and you try and claim this credit anyway, you may find yourself receiving some unwanted attention from Uncle Sam.
Failing to report income
If you work as, say, a server or bartender, but you do not report all of your earned tips, which is a common industry practice, you may be guilty of tax evasion. You can face stiff penalties for failing to report, or underreporting tips, including time behind bars and hefty fines.
Claiming the wrong deductions
Claiming business deductions is a slippery slope, and you have to be very careful when determining what types of expenditures qualify as business expenses. Like failing to report income, claiming the wrong deductions can lead to steep fines and even jail time, so err on the side of caution and do your research in this area before filing.
Some types of tax preparation software can help you avoid some of these errors, but ultimately, the more you understand about the tax-filing process, the less likely you are to find yourself in trouble.