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As the tax filing deadline approaches, many individuals across the United States are busy gathering their paperwork, ensuring accuracy, and preparing to complete their tax returns. This annual obligation can often feel overwhelming, but experts from the Kiplinger Advisor Collective suggest that tax season might not be as daunting as it seems. Instead, it presents an opportunity for individuals to evaluate their financial health and capitalize on potential tax advantages.
For those who find themselves anxious about tax season, recognizing and avoiding common pitfalls can significantly alleviate this stress. By addressing a few key missteps, taxpayers may enhance their financial well-being and streamline their tax preparation process.
Avoid These Common Tax Preparation Mistakes
Overlooking Beneficial Accounts
Failing to utilize tax-advantaged accounts like Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and various retirement plans often leads to missed opportunities. Many people underestimate the importance of these accounts, thinking they are too complex to navigate. A proactive approach involves routinely reviewing contribution limits and effectively using employer-sponsored benefits to decrease tax burdens while securing future financial stability. — Jabin Geevarghese George, Tata Consultancy Services Ltd.
Accumulating Unnecessary Penalties
Many taxpayers incur unexpected penalties and interest because they neglect to engage in proactive tax planning. This situation usually arises from miscalculating withholdings or failing to account for additional income sources throughout the year. The solution is to meticulously verify withholdings from paychecks and other incomes, ensuring they align with tax liabilities. — Doug Oosterhart, LifePoint Planning
Neglecting Year-Round Tracking
Individuals often miss deductions and credits simply because they fail to track their expenses throughout the year. Relying on memory can lead to lost savings. To combat this, maintaining an organized digital folder for receipts, utilizing expense-tracking apps, and regularly reviewing potential tax deductions can make a significant difference in maximizing refunds. — Stephen Nalley, Black Briar Advisors
Last-Minute Preparation
The chaos of rushing to file taxes often results in missed deductions or costly errors. This feeling of urgency can stem from a lack of organization throughout the year. To avoid this, it is beneficial to maintain a system for tracking expenses, consulting financial professionals early, and treating tax season like a routine financial checkup rather than an approaching deadline. — Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management
Overlooking Deductions and Write-offs
Many taxpayers forfeit potential savings because they do not diligently track expenses or assume they do not qualify for certain deductions. Business owners, freelancers, or those with additional income streams should meticulously record all expenses and seek guidance from tax professionals to uncover substantial tax breaks. Every dollar counts—do not risk overpaying the IRS! — Justin Brock, Bobby Brock Insurance
Neglecting Organizational Practices
The most significant issue many face during tax season is a lack of organization and planning throughout the year. Improving these aspects can make tax preparation considerably easier, reducing stress levels. Proper organization allows taxpayers to approach tax time with confidence. — Marguerita Cheng, Blue Ocean Global Wealth
Forgetting to Seek Professional Advice
Navigating tax laws can feel like sailing without direction if one does not have a trusted tax adviser. While it may seem manageable initially, evolving tax regulations can complicate compliance. Engaging a knowledgeable tax professional ensures adherence to tax laws and optimized financial outcomes, preventing potential financial pitfalls in the future. — Zain Jaffer, Zain Ventures
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The information provided here is for informational purposes and should not be considered financial or tax advice. It is recommended to consult with a licensed professional for tailored advice based on your specific circumstances.
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www.kiplinger.com