Tax Mistakes that could Cost you Thousands

Are you sure you are paying correct amount of taxes and availing every tax relief and tax credit? Everyone who is preparing for taxes or has hired a professional to prepare taxes tries to avail every tax break he/she is entitled to. However, with the constant changes and amendments in the tax law it not easy to keep up with the recent tax relief and IRS relief options that you can avail. Therefore, most of the taxpayers tend to file taxes while ignoring the best tax break or using the old tax relief to reduce your tax liability.

Planning is the first thing that most of the people missed out on and this proves to be the basic mistake while planning taxes. You should have proper plan whether you are hiring a tax preparer or doing your taxes on your own. Planning would allow you to segregate your work and give deadline. If you can meet the deadlines, your tax return would hardly have any errors. In case, you are preparing your taxes on your own, you should get to know the new provisions that have been introduced in the tax law and can provide great amount of benefits.

If you are self employed and not employing your family in the business, you are loosing on your tax break. No matter the family member is a kid or senior citizen, you can employ them. You can hire your seven year old kid and avail tax deduction. To enjoy the tax break you would need to pay them a reasonable wage for their services and need to keep a record of their job responsibility and timesheet so as to analyze how many hours they have worked for you. The sheet will also work for you as an audit proof. Make sure you are paying the kids by check so that you can document the payment. All the checks need to be deposited in an account which is in your child’s name. These accounts can be Roth IRA, college saving plan or custodial account that will be under your control until they attain the age of 21.

Since you are into home based business so, your home office qualifies for tax deduction as it is the principal place of your business. You can deduct a portion of your mortgage interest, rent, insurance, property taxes repairs and utilities and home maintenance. However, there are some qualifications that you’d need to meet to get deduction on your home office. First of all, you must be using your home exclusively for your management or administrative services on regular basis. Also, you should not have any other fixed location from where you’re operating your business.