3 tax mistakes to avoid

3 tax mistakes to avoid

While it is certain that some people get into tax problems due to purposeful tax evasion, many get there through their simple mistakes.

Understanding some of the most common tax errors can help you ensure you do not do the same. Here are three:

Overclaiming deductions

The IRS allows you to write off quite a few expenses against your taxes, yet you must stay within those legal limits. If you have multiple employees who submit expenses, you need to ensure they do, too. As soon as the IRS spots something amiss, they may begin a more thorough investigation. If in doubt about whether something is deductible, find a definite answer or err on the side of caution.

Believing your money is hidden 

There are legal ways of moving your money to other places to take advantage of tax breaks. Yet you still need to ensure you declare everything the law requires you to. Take extra care with digital assets. The IRS is fast catching up on those who thought the authorities would never be able to trace assets held in cryptocurrency and non-fungible tokens (NFTs).

Under-reporting income

If money comes in, it needs to go in the books. Any potential gains you might make by doing something cash in hand are far outweighed by the consequences if you are caught.

Tax law is incredibly complex, so getting legal help to ensure you comply is wise. If you did not, and you are already facing problems with the IRS, then remember it is better to face up to them than ignore them. With appropriate guidance, you may be able to negotiate a deal that avoids severe penalties.

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