Financial influencer Taylor Price recently appeared on ‘Varney & Co.’ to discuss how a shift in mindset can empower Americans to grow their wealth and ultimately achieve the American Dream. With the tax season deadline of April 15 approaching, a new report by GOBankingRates highlights common mistakes that could be costing taxpayers significant amounts of money each year.
According to the report, five prevalent tax mistakes can lead to smaller refunds or even penalties for American taxpayers. One key issue is treating tax filing as an annual event rather than a year-round consideration. Christina Taylor, vice president of tax development and delivery at the tax technology platform April, underscored that this limited approach can result in missed credits and optimizations, causing taxpayers to inadvertently return portions of their refunds to the IRS. She noted the staggering fact that last year, Americans overpaid their federal taxes by an average of $3,200 and collectively spent billions of hours on tax preparation.
Another significant mistake highlighted is failing to track deductible expenses throughout the year. Many taxpayers assume they will claim the standard deduction, which often leads to lost opportunities for itemized deductions. Keeping accurate records of charitable contributions, medical expenses, and any potential deductions for interest payments can ensure that taxpayers maximize their refunds.
Incorrectly reporting investment income or stock compensation is also a common pitfall. Taxpayers may mistakenly calculate or report their tax basis, resulting in higher capital gains taxes. Jennifer Kohlbacher, a CPA and director of wealth strategy at Mariner Wealth Advisors, noted that such errors could lead to significant tax overpayments.
For those who are self-employed or operate a small business, missing quarterly estimated tax payments is another area of concern. Failure to pay the appropriate amounts can lead to penalties and interest on underpayments. Additionally, significant life changes, such as marriage or the birth of a child, should prompt taxpayers to update their withholding information, which can help manage tax liability more effectively.
Finally, filing errors and inadequate recordkeeping can complicate the tax process. Mathematical mistakes or simple typos can elevate the chances of a return being flagged for review or audit, leading to potential delays in tax refunds.
As the deadline approaches, taxpayers are encouraged to adopt a proactive approach to their finances throughout the year to minimize errors and maximize deductions.
