5 Common Tax Problems and How to Solve Them

Tax time is a universally recognized period of stress and anxiety for individuals and businesses alike. As the deadline for filing tax returns looms closer, the pressure to accurately report income, deductions, and credits can be overwhelming.

The complexities of tax laws and regulations often lead to common problems that can cause headaches and financial strain; however, it doesn't have to be that way.

In this blog post, we look at the five most common tax problems and provided viable solutions to help you avoid and resolve them. By addressing these common issues head-on, you can minimize your tax liabilities, maximize your deductions, and ensure compliance with all relevant laws.

Poor Record Keeping

If you have not been keeping your business income and expense records well-organized, you may not be able or have the time to complete your return on time.

You can avoid the late filing penalty by requesting an automatic tax-filing extension from the IRS. This extension is only for the filing date. It's not a time extension to pay. To minimize penalties for late payments, estimate the amount you expect to owe and pay it when you apply for an extension.

Keep accurate and timely records of all your business expenses and income. If you find it to be overwhelming and time-consuming, you might want to consider hiring a tax accountant. A tax accountant is a professional who specializes in handling financial matters related to taxes, ensuring accuracy and compliance with the ever-changing tax laws. For instance, if you live in New York City, you can search for a reputable personal tax accountant NYC-based and find someone who will oversee this crucial aspect of your financial well-being.

By enlisting the help of a tax accountant, you can focus on what you do best—running your business or managing your personal finances while leaving the complex task of tracking expenses and income in capable hands.

Failure to File Taxes on Time

According to a survey conducted in 2021, as many as 33% of Americans procrastinate doing their taxes and wait until the last minute. 

Filing taxes can be very tiresome, but the consequences of not filing them are far worse. If you fail to file your taxes on time, you will be subjected to costly penalties and other tax issues. You may be entitled to credits or refunds if you didn’t succeed in filing taxes in previous years. In late filing, the general rule is to avoid postponing. Delaying this will only lead to costlier and time-consuming mistakes.

Making Math Mistakes

Math mistakes can be a common tax problem that many people face. From miscalculating deductions to errors in reporting income, these mistakes can lead to costly consequences. Taxpayers must understand the potential pitfalls and take steps to avoid them.

One of the main reasons behind math mistakes on tax returns is the complexity of the tax code. With numerous rules, regulations, and calculations involved, it's easy for even the most diligent individuals to make errors. Additionally, rushing through the process or failing to double-check calculations can also contribute to these mistakes.

The consequences of math errors on tax returns can range from minor inconveniences such as delays in processing refunds to more serious issues like audits or penalties. These mistakes can trigger an audit by the IRS, leading to additional scrutiny of your financial records and potentially resulting in fines or legal action.

To avoid falling into this common tax problem, taxpayers need to take their time when preparing their returns and ensure accurate calculations. Utilizing software programs or seeking assistance from qualified professionals can also help minimize the risk of math errors.

Incorrectly Filling out Your Forms

Incorrectly filing out your form may seem like a harmless mistake, but its consequences are inconceivable. The majority of taxpayers do not double-check the documents they submit. You may have entered your Social Security number incorrectly or written down your documents in an illegible manner.

To avoid this, it’s important to check your documents before you submit them and check your Social Security number, verify your account number and routing number, and sign anywhere you need to. You should also consider electronic filing, which is faster and cheaper than conventional methods.  

Not Staying Up to Date with the Latest Tax News

New tax laws are introduced every year and they can have a significant impact. It is difficult to keep track of the changes in the tax code but staying informed about the latest tax news will help you avoid problems and take advantage of any available benefits. Visit IRS.gov regularly to stay up-to-date with the latest tax news.

Final Thoughts

Individuals and businesses face various challenges faced during tax time. By implementing best practices and leveraging available resources, you can streamline your tax preparation process, maximize deductions, minimize errors, and ultimately achieve peace of mind during this often stressful period.