We love talking about taxes here.
As financial planners, we think taxes are integral to everything in our financial lives: taxes affects cash flow, taxes create frustration, and taxes never go away.
Taxes are one of the 5 uses of money: Earn, Live, Give, Owe taxes, Owe debt, and Grow.
A lot of people dread Tax Day (or the Extension Tax Day). Whether you will owe taxes and have to cut a check to Uncle Sam, or are expecting a tax refund, stress levels usually rise during this time of year.
Being a financial partner, we already sent out a Tax Pep Memo for clients with multiple accounts. We've had such good feedback on how helpful it is in keeping your tax-mind straight.
Have you ever noticed all of the pictures on the IRS webpage are of people smiling? It's almost like the IRS is making taxes fun!
Unfortunately, since most people are stressed about taxes, and urgently want to get them right, people are capable of making mistakes. Or, in some cases we have seen, people even make an "oops" mistake in their financial reporting.
While you're preparing for taxes, take a deep breath and consider the avoidable mistakes we have seen.
Here are the avoidable - - borderline dump - - mistakes:
- Not filing your return on time or forgetting to file an extension
- Hiding or not reporting income
- Making up deductions (your daily breakfast sandwich and coffee run are probably not deductible)
- Not savings receipts
- Making typos (Saying you had $10,000 of income when you really had $100,000 is an "oops")
- Treating personal expenses as business deductions
- "Fudging the numbers"
Do your best and be honest when you're filing your taxes.
Solomon said, "One who walks in integrity walks securely, but one who perverts his ways will be found out".
In the event you do get audited, as long as you tell the truth, and have all your legitimate receipts, the process shouldn't be overly painful.
What if you get audited?
Red Flags for Tax Auditors