April 15th is right around the corner, so you need to start thinking about your taxes if you have not already. You should prepare yourself for a reduced tax return because reports from the Internal Revenue Service indicate that tax refunds are down by an average of 16.7 percent.
In addition to tempering expectations on your returns, you also need to be mindful of the litany of mistakes people make on their tax forms. A single mistake may result in a criminal charge of tax fraud. Here are a few of the most common ways people mess up on their tax forms.
Ending up with tax preparer fraud
Many people hire tax preparers to handle the hard work for them. There are plenty of reputable tax preparers and you should find someone at a prestigious company who can work for you. You need to be cautious of anyone for whom you cannot find any pertinent information. There are dubious tax preparers who may try to trick you into claiming false deductions to increase their own fees.
Failing to report your entire income
You need to claim every cent you earned on your tax forms. This includes tips if you work in such an industry. Therefore, all servers need to maintain daily records of the tips they received. Tips are taxable income. You could end up with severe penalties if you try to keep some of your income under the table.
Using inflated deductions
Many people will try to claim deductions that are not really there. For example, someone who works from home may try to write off the entire rent payment because the apartment is also office space. You need to claim deductions properly.Otherwise, you could end up in an IRS audit. The chances of the IRS auditing you are low, but you do not want to risk it.