Tax mistakes rarely happen because taxpayers are careless. They usually occur when tax implications are overlooked during everyday financial decisions.
Here are four common mistakes and ways to prevent them.
Too little withholding can create an unexpected tax bill. Review your withholding after filing each year and submit a new Form W-4 if needed. Revisit it after major income changes, unemployment benefits, or when estimated payments may be required.
Withdrawals from pre-tax accounts such as 401(k)s and IRAs may create taxable income. Use direct rollovers whenever possible and confirm that proper taxes are withheld from any taxable distribution.
Failing to use tax-deferred retirement plans may mean missing opportunities to reduce taxable income. Review your options and contribute as much as practical, especially when an employer match is available.
The IRS may disallow valid deductions without supporting records. Maintain digital and paper files by income and expense categories. Keep mileage logs and documentation for charitable gifts, medical expenses, and childcare costs.
Contact Alloy Silverstein today for help reviewing your tax plan.
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