Top Ten Tax Mistakes to Avoid, Part 2

Mistake #5: Losing Receipts

The IRS will not accept credit card statements in lieu of an original receipt. Keep your receipts somewhere safe, or scan them into your computer for safekeeping.

Tip: Hang onto receipts for at least 7 years. The IRS can audit a return for up to three years from the filing date.

Mistake #4 Claiming Bogus Dependents

You cannot claim your pet! The maximum penalty for this is 3 years in prison and $250,000 in fines – yet hundreds of people claim pets every year.

Mistake #3: Math Errors

Math mistakes could reduce your tax refund or cause you to pay more than you need to. Avoid getting an immediate correction notice, check and double check your math.

Mistake #2: Failing To Report Domestic Workers

Under current law, any family or individual who employs someone they pay more than $1,800 a year is considered an employer in the eyes of the IRS and is required to pay taxes for that employee.

One man, who employed a full-time live-in elderly caregiver for nine years without paying taxes, was subject to paying the government $90,000 in back taxes plus an additional $60,000 in penalties.

Mistake #1: Forgetting To Sign and Date

More than 1 million people forget to sign their return every year. The IRS will not process your return if it’s missing your signature!

[Check out the Top Ten Tax Mistakes to Avoid, Part 1 right here.]