Keeping up with current tax laws is challenging, but it’s necessary for those who plan to do their own taxes. Even if you use a professional tax preparer, you must still ensure the information you provide to them is accurate.
There are some tax issues that are actually fraud. While the Internal Revenue Service often gives people the benefit of the doubt for simple mistakes that are obviously not intentional, you shouldn’t ever count on that happening. Ensure you don’t make these five errors that could land you in legal trouble.
#1: Claiming Earned Income Tax Credit if you don’t qualify
The eligibility requirements for EITC change annually. Double-check that you qualify each year so you don’t end up claiming it when you don’t actually qualify.
#2: Reporting your income incorrectly
You must report your entire income, which includes anything you earned from anywhere. Tips, cash payments and any other income should be recorded during the year so you can report it when you file your income taxes.
#3: Inflating charitable donation totals
You never know when the IRS will ask for proof of charitable donations. Make sure you don’t overinflate the amount you donated. This is especially important if you gave items instead of money since you need to know the value of what you donated.
#4: Using tax deductions you don’t qualify for
Never claim deductions you don’t actually qualify to use. This could be something like the home office deduction or any business write-off. Medical bills and other deductions you can claim if you itemize your return should be reported precisely.
#5: Failing to include required forms
Certain deductions and situations require that you include specific forms. Failing to include those forms with your tax return can lead to serious issues. Incomplete income tax returns can trigger an audit, which leads to the IRS looking closer at every aspect of your return.
Any indication that there’s an issue with the IRS should spur you into action. Learning your options for the situation is beneficial. These matters are often complex, so you should work with someone familiar with the tax code so they can help you determine the best course of action.