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Scrambling to file taxes before the deadline? 7 tips every renter needs to know.
If you’ve put off filing your taxes, there’s still time to do taxes last minute. This year, the tax deadline is April 18th. Filling your tax return accurately and knowing what deductions to take for the best possible return and to avoid trouble (aka delay or audit) is key. Here are tax filing pitfalls to avoid.
1. Beware of mismatches and typos
It may sound obvious, but filing an accurate return is the best way to avoid an audit. The IRS reviews 1099s and W-2s and a mismatch could trigger a red flag. Common mistakes include transposing digits and typing in the wrong line.
Using a software like Turbo-Tax can help, but make sure to check your data entry.
2. No rounding
It’s always best to use the precise dollar and cents when claiming a deduction. Round ups can be a trigger for an audit because they signal to the IRS that a person just loosely estimated rather than relying on real numbers for the deductions they are claiming.
3. Deduct only reasonable expenses for your side gig
If you have side-hustle income over the course of a few years, the IRS may take a closer look at the expenses you are claiming to make sure they are reasonable and that you are not making write-offs against a hobby vs. a real income-generating service.
For example, if you make side-money walking dogs but you write off an entire new wardrobe, gas money, appliances for your apartment and other unrelated items to the service, this will eventually catch up to you.
However, a subscription to a paid-business related service, necessary tools and equipment to book your services and business mileage for the trips to and from your clients makes sense.
4. Don’t exaggerate home office or charity deductions
Since 2021 the number of people working from home remains high. To qualify for the home-office deduction, however, you must be self-employed, an independent contractor, or earning money through side gigs. Employees who receive paychecks and W2s cannot claim the home office deduction.
Also, the space you claim needs to be used exclusively for work. Using your kitchen table or your bedroom doesn’t count.
For any charity donations made, make sure to keep the receipts. For anything over $300, it’s required. The charitable contributions limit for 2022 is 60% of your Adjusted Gross Income.
5. Don’t hide crypto earnings from your tax filing
This year, cryptocurrency is front and center on the tax return. You can’t avoid it. Taxable transactions must be reported with capital gains or losses to the IRS.
If you answer “no” and there is evidence you have a transaction, you may trigger an audit. It’s difficult to predict how many of these transactions are going to get a look though, especially if small.
6. Standard tax deduction increases in 2022
The standard tax deduction for married couples filing jointly in 2022 increases by $800 to $25,900.
Single taxpayers and married individuals filing separately will see standard tax deduction increase by $400 to $12,950 and for heads of households increases to $19,400, up $600.
7. Earned income tax credit
This is a great benefit for low-to-moderate income families. For the 2022 tax year the earned income credit ranges from $560 to $6,935 depending on tax-filing status, income and number of children. People without kids can qualify.
Qualification varies by income, number of dependents, and filing status – you can see if qualify here. You’ll also need a valid social security number by the due date of your 2022 return.
How to file last minute taxes
There are three main ways to file taxes.
- Fill out IRS Form 1040 or Form 1040-SR by hand and mail it (not recommended)
- Use tax software and file taxes online
- Hire a human tax preparer to do the work of tax filing.
TurboTax, H&R Block, TaxAct and TaxSlayer, for example, all offer software packages or support options that come with on-demand, on-screen or online access to human tax pros who can answer questions, review your return and even file taxes online for you. This can be a great way to file last minute taxes.
How to file an extension on your tax return
If last minute taxes before the deadline aren’t possible for you, then make sure to file an extension on your taxes with the IRS. Fill out Form 4868 online for free or with their tax preparer. It’s free to file an extension and you don’t have to explain why you’re asking for the extension.
Note – if you end up owing taxes, even with an extension, you’ll end up having to pay a 0.5% of taxes owed after Tax Day for each month the tax isn’t paid, up to 25%. So, don’t delay!
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