Tax Day 2018 is right around the corner: Tuesday, April 17. With the deadline to file a federal income tax return counting down, millions of taxpayers – yourself possibly included – are racing to ensure that their returns are prepared properly and submitted on time. However, mistakes are more likely to occur when a taxpayer rushes, which can lead to forgetting or overlooking critical details. With that in mind, take care to avoid these three tax filing mistakes when you submit your 2017 return to the IRS – and if you’re feeling a little overwhelmed, remember that an experienced tax advisor is only a phone call away. If you need help filing your California state taxes or federal taxes this year, contact the Roseville tax preparers of Cook CPA Group for detailed guidance and prompt assistance.
3 Errors to Avoid When Filing Your 2017 Federal Income Tax Return
Even with the recent tax reforms under the Tax Cuts and Jobs Act (TCJA), the U.S. Tax Code isn’t exactly known for its simplicity. On the contrary, the Tax Code is full of fine print and complex regulations, which makes it easy for taxpayers to make costly mistakes. Here are three of the most common to watch out for.
Tax Mistake #1: Failure to Pay on Time
To reiterate, the 2018 tax deadline is Tuesday, April 17. That’s two days later than the normal filing deadline of April 15, which means taxpayers effectively get a 48-hour extension this year. However, even with the two-day cushion, you may need more time to gather information or hunt down missing documents. (To provide a few examples of some documents you might need to complete your tax return successfully, you’ll require Form 1095-A if you were enrolled in Obamacare, Form 1095-B or 1095-C if you had health insurance through your employer or other sources, and Form 1098-E if you paid interest on student loans.)
The good news is that you can obtain an extension by filing Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return), which can extend the due date by up to six months. The bad news – which many taxpayers find out the hard way – is that the time extension only applies to filing the return, and does not give you additional time to pay the taxes you owe.
Failing to pay your taxes on time can trigger a failure-to-pay penalty, which is 0.5% of the unpaid tax amount. As the IRS explains, “That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.”
If you requested the filing extension on time (i.e. by April 17), you may be able to avoid the failure-to-pay penalty, depending on whether and to what extent you paid the taxes owed at that time. However, in most situations, the bottom line is that if you expect to owe taxes and wish to avoid financial penalties, you should make every effort to pay your estimated tax bill by April 17, 2018.
Tax Mistake #2: Failure to Meet the Deadline
Theoretically, the IRS should consider your tax return to meet the deadline as long as the return was postmarked by midnight of the due date, April 17. However, if there are any weather issues or mail mix-ups, your return could be delayed or even lost. This will cause the IRS to impose not only the failure-to-pay penalty described above, but additionally, a failure-to-file penalty – which is even more expensive.
Compared to the failure-to-pay penalty, which is 0.5% per month in which the tax remains unpaid, the penalty for failing to file is, in most cases, a full 5% per month. The penalty is higher because the IRS considers failing to file to be a more serious issue than failing to pay.
Fortunately, there are three easy ways to avoid falling into this trap:
- You may file your taxes online, which eliminates the risk of postal delays.
- You can use certain registered or certified mail services that are approved by the IRS, such as FedEx Priority Overnight or USPS Next Day Air Saver.
- You can hire an experienced tax preparation service for individuals. Consulting with tax professionals will ensure that you take advantage of tax breaks, keep penalties to a minimum, and feel confident that you are taking the appropriate steps to comply with IRS requirements.
Tax Mistake #3: Submitting the Wrong Information
This one may sound silly or obvious, yet is worth mentioning due to its prevalence. You would likely be surprised by how many tax returns are compromised each year by small, preventable errors and discrepancies, so be sure to double-check (and triple-check) each part of your return for:
- Missing signatures
- Mathematical errors
- Incorrect Social Security or bank account numbers
- Incorrect filing statuses (e.g. “single” versus “head of household”)
- Out-of-date surnames or addresses
Get Tax Preparation Help from Experienced Accountants Serving Sacramento and Roseville, CA
If you need assistance filing a California or federal income tax return, need help with related issues like back taxes or tax audits, or have questions about how you or your business might be affected by the Tax Cuts and Jobs Act this year, we invite you to contact Cook CPA Group for a free consultation with our knowledgeable tax accountants. We handle income taxes, employment and payroll taxes, Bitcoin tax consultations, and more. For a free consultation, contact our Sacramento CPA firm online, or call today at (916) 724-1665.