Doing your own taxes can prove complicated, but paying someone else to do them can be expensive, costing you considerable money on top of what you may already owe to the Internal Revenue Service. While the language and calculations involved may be bewildering, tax-related crimes also have serious consequences, so it is important to avoid any “guessing” to ensure you stay on the right side of the law.
In many cases, people who commit tax crimes do not intend to do so; they occur because of negligence, rather than maliciousness or deceitful behavior. Nevertheless, tax crimes can have grave repercussions at the federal level. Recognizing some of the most common tax errors may help you avoid them come tax time.
Error 1: Taking wrong or inflated tax deductions
If you do not want to raise a red flag with the IRS, you must be careful when claiming tax deductions. First, you need to make sure you are eligible to claim the deductions you take, and second, you must make sure not to overinflate the deductions for which you do qualify. For example, maybe you work from home, and you want to claim the home office deduction. To do so, you must use the space you describe exclusively for work, or you may find yourself in hot water with the IRS.
Error 2: Mistakenly claiming the Earned Income Tax Credit
Generally, your chance of getting audited by the IRS is relatively low, but mistakenly claiming the Earned Income Tax Credit is one notable way to call unwanted attention to yourself. This credit can help those who earn lower incomes, but you must meet specific income criteria to qualify. Furthermore, the income criteria may change from one year to the next, so do not assume you are eligible simply because you were last year.
Tax crimes can be easy to commit unknowingly, but most are also avoidable with proper research. To make sure you steer clear of them, it can help to seek a professional’s guidance.