U.S. Markets closed

4 tax mistakes to avoid

If you haven’t already gotten your W-2 or your 1099-Miscellaneous forms yet, you will soon. If your taxes are simple, you might elect to do it at home with a software like TurboTax or H&R Block.

But be careful you’re not leaving out any income or missing out on any possible deductions. Jenna Ivanoski, a TaxAct product manager, shares four common mistakes you can avoid when filing your taxes.

Don’t leave out any paperwork

Your employer is required to send out W-2 forms and 1099-Miscellaneous forms by Jan. 31. Make sure you have accounted for all of your income when you file, even income that comes in under the minimum required to send a 1099.

The minimum amount you have to have earned for a company to send you a 1099-Misc is $600, but you’re required to file anything more than $400. So there’s a bit of a gap that can trip people up. Make sure you’re not one of them.

Don’t lose your receipts

Your credit card or bank statements are not sufficient substitutes for receipts. The reason for keeping receipts is to provide proof that what you spent money on was a business receipt in the event you get audited.

Don’t miss quarterly tax payments

If you’re a freelancer or self-employed, make sure you pay estimated quarterly taxes if you expect to owe more than $1,000. The IRS has tips on how to estimate what you’ll owe, how to pay it and when to pay on its website.

You might not have to pay quarterly taxes, though, if your untaxed income comes from a side hustle. You can update your W-4 at your main job to have fewer allowances and more tax withheld from each paycheck. You should still do the math to determine how much you expect to earn in untaxed pay so that you know how much extra you’ll need to have withheld from your W-2 job.

Don’t expect a payment deadline extension

If you’re a procrastinator, you can file for an extension on your taxes. But if you owe money, it’s still due in April. Extensions should only be used by those who expect to get refunds rather than those who expect to owe taxes.