Income Tax Return (ITR) filing is a vital yearly chore for taxpayers in India. Income tax is paid on persons’ and corporations’ income and earnings. In addition to being required by law, paying your taxes guarantees that you support national development and government finances. It also allows you to claim benefits like valuable income proof, which is helpful when applying for visas, loans, or government tenders. You can also claim tax refunds if you overpaid taxes.
It is also crucial to be watchful and avoid frequent blunders that might result in fines, delays, or even legal issues as tax season draws near and the process becomes more streamlined and digitalized.
Accurate compliance is essential when completing your income tax return (ITR). Discover the top 10 errors to avoid for a smooth tax filing experience.
Common Errors in Tax Filing
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Ten of the most typical filing errors are listed here, along with suggestions for avoiding them.
You forget the fundamentals
Verify that the Social Security number on file is accurate and that your and your dependents’ names are spelled appropriately. And remember to choose the appropriate filing status based on your circumstances. For instance, you can file as single if you’re unmarried. Still, suppose you fulfill the conditions for head of household or qualified widow with a dependent child. In that case, you can be eligible for various tax benefits and more favorable tax rates. Additionally, if married couples file individually rather than jointly, they may pay less tax under certain conditions. Should several filing statuses be applicable, the IRS.gov Interactive Tax Assistant can assist you in selecting the appropriate one.
You input things incorrectly on the line
Ensure that your input shows where you wish them to be on your tax forms. For instance, do not use the line intended for taxable IRA distributions to deposit your tax-free IRA rollover. This problem should be avoided by using tax software, but before hitting the submit button, always ensure everything appears where it should on your final return.
You subtract the regular amount automatically.
Even while itemizing involves more work than relying only on the standard deduction—along with receipts and other documentation—you risk losing money if you do so. Verify which option offers you the most write-off. It should be noted that the Tax Cuts and Jobs Act of 2018 roughly quadrupled the standard deduction, making itemizing less likely to result in cost savings.
Nevertheless, doing the statistics both ways always helps. The majority of tax software determines which approach is best for you on its own.
You refuse to accept write-offs that are legally yours.
Some people could be afraid that a specific deduction constitutes a red flag for an audit and avoid it. For instance, there is still a misconception that declaring a home office deduction will result in an audit by the IRS. This is undoubtedly untrue, primarily because many individuals now work from home, and the IRS established a simplified deduction option instead of writing off actual expenditures. It makes sense to claim the deduction if you are eligible under tax rules.
The one catch, which is a major one, is that since you are self-employed, you may only claim a deduction for your home office if you utilize it. Companies often do not allow employees to claim unreimbursed home office expenditures as a Schedule A miscellaneous itemized deduction.
You neglected to remember your mandate for state healthcare.
In terms of federal taxes, the individual mandate of the Affordable Care Act (ACA) was repealed in 2019. This requirement forced you to pay a penalty charge for each month that you (or your family, if applicable) did not have qualified health coverage.
Be sure you are aware of the requirements in your state, though, as several states have unique health insurance mandates.
The IRS is not informed on how to handle your refund.
Think ahead of time about what you want the government to do with your unpaid taxes if you are entitled to a refund. The U.S. Treasury will mail you a paper check if you still need to act.
Your refund will arrive considerably faster if you include your bank account information, including the account number and routing number, and if you would like it deposited directly into your account. Or you may split your return among three accounts if you’d like.
You make errors in math.
According to the IRS, math errors were among the most frequent filing errors. These might be as simple as addition and subtraction or as complicated as calculations.
Always verify your calculations twice, or even better, utilize tax preparation software that does the calculations.
See the IRS guidelines if you must submit an item as a negative number. While some versions use the minus sign, others prefer to use parentheses. This guarantees that IRS computers accurately read the negative input.
You enter incorrect payment information.
Verify that your payment is appropriately credited to you if you owe taxes. File electronically or on paper, then send Form 1040-V and your payment. Alternatively, you can utilize a credit or debit card through a payment source approved by the IRS or one of the government’s free payment sites (EFTPS.gov or Direct Pay). Make changes to your return using Form 1040-X, Amended U.S. Individual Income Tax Return if you discover a mistake.
Not disclosing previous employment income
Along with the income from the present employment, if an individual changed jobs during the fiscal year, the prior employer’s income must also be disclosed when completing the ITR. A difference between the TDS certificate and Form 26AS may result from failing to disclose this income.
Failing to declare overseas income and assets
The government has taken steps to restrict money leaving India and fight black money. Taxpayers must declare any overseas income or assets, including foreign bank accounts or real estate, in their yearly income tax filings. There may be severe fines and legal repercussions if this is not done.
How Much Time Do I Need to Save My Tax Returns?
The Internal Revenue Service (IRS) instructs you to preserve your tax returns and supporting documentation for at least three years, sometimes up to seven years. For instance, if you want to file for a bad debt deduction or a loss from impotent stocks, you must keep your records for seven years. You should preserve your records for six years if you do not disclose revenue above twenty-five percent of the gross income shown on your return. You should preserve your data indefinitely if you file a bogus return or neglect to file one.
The Final Word
Always be sure to sign your tax return. It is not genuine unless you sign it or your spouse if you file jointly. Keep a copy of your signed return and your evidence of filing, which can be either an acknowledgment that the IRS has accepted your electronically filed return or a certified receipt for a paper return sent by mail. This proof protects you from IRS charges you did not file or submit your paperwork on time. Your prior tax returns will also be useful if you ever need to file an amended or future tax returns.
