Preparing to file your first tax return on your own can be a daunting idea. But even though you may have heard horror stories about taxes, the truth is that you're unlikely to have such difficulty and are more likely to realize that it's truly not that bad. The key is to avoid making a few rookie mistakes. Here is a list of 4 of the most common -- and most easily avoidable.
It should be obvious that you need to start by filing taxes -- and doing so by the general deadline of April 15. Avoiding filing taxes doesn't help your situation, and it will probably make it worse. The IRS gets copies of most income statements (including Forms W-2 and Forms 1099) from the payer, so they know how much you earned. So, if you fail to file on time, you will either get a letter from the IRS with interest and penalties calculated or you will be forfeiting part of your refund. How do you know if you are required to file? You can use this handy IRS guide online.
Making Math Errors
Fortunately for the mathematically challenged, electronic filing makes many math errors obsolete because it does much of the work for you. However, you must still enter correct information. So, be sure to double check any number you enter (especially your direct deposit information) and any information you copied from a form to ensure that you didn't transpose numbers, add digits, misplace zeroes or enter info from the wrong box. And, obviously, if filing on paper, take the time to go back and recalculate all your numbers before signing the return.
Using a Complex Form
If filing for yourself, opt for the simpler Form 1040-EZ or Form 1040A if possible, since these forms have less to fill out and fewer calculations for you to complete. For most young filers, these two forms will cover what is needed. Form 1040-EZ is the simplest to fill out (just one page!) and works well for anyone with only Forms W-2, no children and little or no investment income. Upgrade to Form 1040A if you need to deduct student loan interest, include dividends or interest, report an IRA distribution or claim education credits.
Not Asking for Help
If you wonder if your tax situation might be a little more complicated than you think -- if you have kids, investment income or Form 1099 work, for example -- don't try to go it alone. If your circumstances mean that you can't file using the above two simpler forms, you probably need to seek out professional help. While it may cost you a little more to have someone do your taxes for you, it can save you a lot of money in credits, deductions, errors and dealing with the IRS.
While it's no fun to have to file taxes, it can be less stressful than you might think. If you avoid these 4 mistakes, you can meet the challenge of April 15 with confidence and ease.
If all this seems a little too overwhelming for you, contact professionals, such as The Callen Accounting Group, PLLC, for help.