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5 Tax Mistakes to Avoid in 2020

Tax season is slowly approaching, and no one wants to get hit with any penalties. By finding the tax mistakes that you can avoid in the 2020 season, you can feel more prepared and confident. No one wants to end up owing money, but there are some huge mistakes that can cost you more in the long run. By avoiding these five tax mistakes, you can be confident in your return when you submit.  

1. Don’t Wait To File Until The Last Minute

When you file a late return, there are penalties and fees that can be accrued if you owe money to the IRS. If you are not sure you can get your tax return finished and submitted by the 15 April deadline, go ahead and file for an extension. This will help protect you in a late filing.  

2. Be Sure To File If You Make More Than The Standard Deduction

Knowing what the standard deductions are can save you a lot of grief. This will differ for those who are single or married, if you are the head of household, or if you are married and filing jointly. Knowing what these baseline figures are can help to determine IF you need to file.  

3. Do NOT Hide Any Income

We cannot stress this one enough! If you are getting paid for some things under the table, accepting cash instead of trackable income, this still has to be reported. There are instances where some income does not have to be claimed, such as some military benefits, but your tax accountant can help you determine these. If you hide income and are found out, the penalties can be very severe. In addition to having to pay late fees for an amended return, interest will be tacked onto that fee, which will drastically raise the amount you owe.  

4. To Trash or Keep Your Documents

When in doubt, hold onto everything. When it comes to documents that you are using for your returns, such as write-offs, W-2s, 1099s, and donation slips, keep it all! A good rule of thumb to follow is to keep everything for at least five years. This way, in case an issue arises, or amendments have to be made, you have the documents to back up your return. Without these documents, you could incur a penalty if there are questions about your return. It is better to be over-prepared, rather than not having your documents together.  

5. Be Sure to Claim All Eligible Deductions and Credits

Each year, many Americans leave money on the table that they could claim. Knowing what you are able to deduct, such as childcare credits and education, can help to ensure that you are getting the maximum return. These credits and deductions could be the difference in getting a return and owing money when you file. If you are in doubt of the available deductions and credits, the tax professional that you are using can help to determine what you can and cannot claim.   Tax season should not be a stressful time. Being prepared and informed can keep you from making the five tax mistakes that lead to a stressful 2020 filing season! If you have any questions, we have the answers! Please reach out, either online or over the phone, so that we can help you!

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What’s your financial big picture?

As a military member, you may already have a basic plan laid out for your future. You may be planning to start a family, purchase a home, or shop for a new vehicle. Either way, the best financial plans start with a big picture. With 2017 already in full swing, take the time to reflect on your specific goals, outside of how much they may cost or how limited you may feel your resources are.

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Tax Treatment of Travel Expenses

If you are self-employed, you may be able to deduct the ordinary and necessary expenses of traveling away from home for your business. If you are an employee and incur unreimbursed travel expenses while traveling from your “tax home,” these expenses are deductible as miscellaneous expenses subject to the 2 percent of adjusted gross income floor (if you itemize your deductions on a Schedule A). These expenses can include the cost of transportation, lodging, and/or meals.

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Tax Credits: Child and Dependent Care Credit

If you have a child or other dependent and work outside the home, you may need to pay someone to care for your loved ones. Fortunately, the child and dependent care credit may provide some financial relief. The child and dependent care credit is an income tax credit for up to 35 percent of certain expenses you paid to provide care for your dependent child, your disabled spouse, or a disabled dependent while you worked or looked for work.

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Adjustments to Income and Itemized Deductions: Members of the Armed Forces

As a taxpayer, you may be able to subtract certain amounts from your gross income to arrive at your adjusted gross income (AGI). Further, you may then subtract from your AGI the greater of either your standard deduction (which is based on your filing status) or the total of your itemized deductions. As a member of the U.S. Armed Forces, you may find the following considerations of particular interest to you.

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Taxable vs. Nontaxable Income: Members of the Armed Forces

If you’re a member of the U.S. Armed Forces on active duty, you’re generally not required to pay federal income tax on all the income you receive. What’s taxed and what’s not taxed depends on what form the income takes and, in some cases, where the income is earned. Generally, basic pay, special pay, and bonuses are taxable (unless they’ve been earned for service in a combat zone), while in-kind benefits, reimbursements, and allowances are not taxable.

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Organizing Important Records and Documents

A record-keeping system is a systematic approach to retaining and filing documents in a way that makes them easy to find when needed, even if it’s several years later. Record-keeping systems range from simple to elaborate and from basic to comprehensive. The ideal system is designed to fit your personal and family situation and lifestyle.

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