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6 Tax-filing Mistakes to Avoid

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During almost eight years at the IRS I saw the same mistakes again and again.

Here are 6 of them that you can avoid.

First... never under report your income. That's a quick way to run afoul of the IRS.

The basic rule is: all income is taxable unless it’s specifically excluded, like certain gifts and some inheritances.

And don’t forget that income from a cash-based business also needs to be reported--

like selling items online or renting a room in your house.

Second, don’t claim a deduction that you can’t support.

Make sure you have documentation to support your deductions, like charitable donations, childcare or medical expenses.

Next, sometimes it can be the simplest mistakes that give people the biggest headaches, like entering incorrect dollar amounts, putting information in the wrong line or making simple a computation error.

A tax program can increase the overall accuracy of your return and help identify deductions that you may not know about.

Fourth, don’t rely solely on that software for everything.

It won’t catch basic input errors, like entering the wrong tax ID, Social Security number, or address.

So, double-check your tax return and make sure the numbers match what’s on your W-2, 1099, or other important tax documents. 

Also, compare this year’s return to last year’s and be on the lookout for any unexplained differences.

Fifth, never ignore letters from the IRS.

A quick response can speed up the processing of your tax return. 

If you’re worried that it could be a scam, call the IRS directly.

Most scammers tend to use emails and phone calls, but the IRS will not call you about a tax debt without first mailing you an official notice.

For more information on tax scams, go to irs.gov - and type scam in the search bar.

Finally, when you're finished, don't forget to keep copies of all those documents along with a hard copy of your tax return.

You’ll need to keep this for at least 7 years.

For more tips on managing your taxes efficiently, watch the other videos in this series, or visit our Tax Strategies page on Insights & Ideas.

Important Disclosures

The information provided here is for general informational purposes only. It is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner or investment manager.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

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