Preparing for Tax Season: Common Mistakes and How to Avoid Them

With tax season upon us, it’s time to take stock of your financial records and note any changes that may impact your filing this year. Our NPTC team is here to help. In our decades of experience working in wealth management, we’re well-versed in the common mistakes people make during tax season that can complicate the filing process and comprise their tax benefits.  Considering these trends, we’ve synthesized best practices to help filers avoid filing pitfalls and effectively navigate tax season. Here are some red flags you should avoid when filing your taxes:

• Procrastinating Filing Taxes or Ignoring Tax Deadlines. Tax season can often creep up on us. That’s why it’s important to research tax deadlines and proactively prepare your records. Many make the mistake of waiting until the last minute to start their tax returns, leaving them susceptible to missing the filing or payment deadline and incurring penalties. To avoid this mistake, set a calendar reminder with key deadlines and get started early on gathering your necessary documents.

• Failing to Organize Financial Records. As financial records flood in, it’s easy to misplace W-2s, 1099s, receipts, or deduction records. We recommend using a digital or physical filing system to organize all your tax-related documents.

• Overlooking Eligible Deductions and Credits. The IRS offers a host of deductions that may apply to you, including student loan interest, home office expenses, or childcare credits. Review IRS guidelines or consult a tax professional to ensure you claim all applicable deductions and credits.

• Not Updating Personal Information. Changes in life circumstances—including marriage, divorce, or relocation—will likely impact your filing status. Make sure to notify the IRS and relevant financial institutions of any changes you have experienced over the past year.

• Using the Wrong Filing Status. The filing status you select will directly affect your tax benefits. It’s important to research the criteria for each status and select the one that accurately reflects your situation.

• Neglecting Estimated Tax Payments. Tax filings are an ongoing process. Many forget to pay quarterly taxes if they’re self-employed or have multiple income sources. To avoid penalties, make sure to calculate and pay your estimated taxes throughout the year.

• Overlooking Tax Law Changes and Failing to Seek Professional Help When Needed. Let’s face it, tax season can be… taxing. Attempting to handle complex tax situations without adequate knowledge of the tax laws can hinder your return. Remember, there are many professionals available to walk you through the process. Consider hiring a tax professional for guidance and accuracy.

• Not Keeping a Copy of Your Return. After you file your taxes, keep your return and supporting documents for future reference. We recommend keeping digital and/or physical copies for at least three years.

By following these guidelines, you can navigate tax season with greater ease and ensure you’re maximizing your benefit this year. Your Nixon Peabody team is here to support and guide you every step of the way. Whether you’re revisiting your goals, navigating complex life changes, or staying ahead of market trends, we’re committed to helping you make informed decisions and reach your financial aspirations. Let’s work together to make this year a milestone in your financial journey.

Mark Hannon
Director of Tax Services
+1 617.345.1064
mhannon@nixonpeabody.com