There are many tax mistakes to avoid, a lot of which are common sense, says Rob Wood, a tax attorney with Wood, LLP in San Francisco, California.
Failing to declare income is a big mistake, says Wood, as it's important to report all 1099s. If you receive a 1099 and don't put it on your tax return, it will trigger an audit of some sort, Wood says. If you receive income and don't get a 1099, it's not a mismatch to over-report, and the IRS won’t fault you for doing so. Wood notes that, if you ask for a 1099, it might have already been reported and you just never received a copy. If that's the case, you run the risk of doubling the income.
Wood says sloppy records could lead to all sorts of trouble, so it's important to maintain accurate records. Also, with the tough rules being enforced by the Foreign Account Tax Compliance Act (FATCA), there's more reporting than ever right now, so it's important not to forget about foreign income.
It's not always a better idea for married couples to file jointly, even though 95% of married couples do, says Wood. He says you need to see if it's worth it and how much money you'd be saving. It's especially a good idea to file separately if one spouse has financial problems outside of the couple’s joint income.
These are all good things to consider before things go south, Wood says, because by then, it's too late.
For more information on the article Wood has written in Forbes magazine, “Top 10 Tax Mistakes to Avoid At All Costs,” click here. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.