1. Skipping Out on Deductions and Credits
How to Avoid It:
- Review the eligibility criteria for credits and deductions, especially if your income or family situation changed in 2024.
- Double-check popular credits and deductions for families, such as the Child and Dependent Care Credit.
Quick Tip: Not sure what you qualify for? Schedule a consultation with DownieTax, and we’ll help you make sure you’re not missing any savings.
2. Choosing the Wrong Filing Status
Why It’s a Mistake: Your filing status impacts your tax bracket and eligibility for certain credits, so choosing the wrong one can increase your tax bill. Filing statuses include Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er).
How to Avoid It:
- Pick the filing status that best matches your situation. For example, Head of Household can be beneficial if you support a dependent and cover more than half of your household expenses.
- If you’re not sure which status works best, a tax pro can help you choose the most beneficial option.
Quick Tip: If you’re separated or recently divorced, consider the differences between filing jointly and separately to get the best outcome.
3. Forgetting to Report All Your Income
Why It’s a Mistake: Failing to report income, even from side gigs or investments, can lead to IRS notices, penalties, or worse. This includes any income from freelancing, rental properties, or investments.
How to Avoid It:
- Track all income sources, including W-2s, 1099s, and investment income.
- Use bank statements or accounting software to ensure nothing gets missed.
Quick Tip: Got multiple income streams? Working with a tax pro can help you stay on top of reporting and avoid potential issues.
4. Not Accounting for Big Life Changes
Why It’s a Mistake: Life changes—like getting married, having a child, buying a home, or going back to school—can affect your tax situation in a big way. Ignoring these changes means you might miss out on valuable tax benefits.
How to Avoid It:
- Review any major life events from 2024 to see how they affect your taxes. For example, first-time homeowners can take advantage of the mortgage interest deduction, and new parents may qualify for the Child Tax Credit.
Quick Tip: Planning a major life change? A quick tax planning session can help you understand how it could impact your taxes and identify potential deductions.
5. Making Mistakes in Personal Info
Why It’s a Mistake: Simple mistakes—like a misspelled name or an incorrect Social Security number—can delay your refund or cause your return to be rejected.
How to Avoid It:
- Double-check all personal info on your return, including names, Social Security numbers, and addresses.
- Ensure everything matches what’s on file with the Social Security Administration to avoid any issues.
Quick Tip: These simple errors are easy to miss, so take a few extra minutes to review!
6. Missing Out on Retirement Contributions
Why It’s a Mistake: Failing to contribute to retirement accounts means losing out on potential tax savings and growth for the future. Contributions to tax-deferred accounts, like a 401(k) or IRA, can lower your taxable income now.
How to Avoid It:
- Maximize contributions to retirement accounts by the April 15 deadline.
- If you’re self-employed, check out options like a SEP IRA or Solo 401(k) for added tax benefits.
Quick Tip: Not sure how much to contribute? Our tax advisors can guide you on retirement contribution strategies that match your income and goals.
7. Ignoring Estimated Tax Payments (If You’re Self-Employed)
Why It’s a Mistake: Freelancers, contractors, and small business owners often need to make quarterly estimated tax payments. Skipping these payments can lead to penalties when you file your return.
How to Avoid It:
- Set aside a portion of your income for taxes and make estimated payments by each deadline.
- Use budgeting software or track your income and expenses to stay on top of estimated tax obligations.
Quick Tip: Unsure how much to pay? Schedule a tax planning session to set up an efficient strategy for your business.
8. Waiting Until the Last Minute
How to Avoid It:
- Start gathering documents and filing early for the best results.
- If you need extra time, file for an extension withForm 4868, but remember, this only extends the filing deadline—not the payment deadline.
Quick Tip: Getting an early start gives you more time to review everything. Need help staying on track? Let DownieTax help you organize and streamline the process.
Final Thoughts
Avoiding common tax mistakes takes a little planning, but it can make all the difference in how smoothly your filing season goes. From maximizing deductions to ensuring your information is accurate, these steps will help you approach tax season confidently and effectively.
Don’t let tax season sneak up on you! Book a tax planning session with DownieTax to make sure you’re ready, avoid common mistakes, and get the most out of your return. Whether you’re filing as an individual, supporting a family, or juggling multiple income sources, we’re here to help every step of the way.
