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7 mistakes to steer clear of when filing tax returns

7 mistakes to steer clear of when filing tax returns

It is rightly said that “a penny saved is a penny earned.” Every dollar saved today can contribute to a hassle-free and blissful future, allowing us to seamlessly fulfill our long-term financial goals. A sizable portion of our salaries is typically spent on paying taxes, contributing significantly to government revenue. Although paying taxes is every citizen’s responsibility, avoiding inevitable common mistakes can help taxpayers save money. Some such mistakes to avoid are:

Not investing in tax-saving avenues
Tax-saving investments can help investors avoid unnecessary taxation to help them work toward their long-term financial objectives. Several tax-saving and tax-free investment options are available today; selecting your tax-free investments should depend on your requirements, income levels, and goals. Municipal bonds, tax-exempt ETFs, and specific index mutual funds are highly tax-saving options. Additionally, some tax-free avenues to consider are 401(k)/403(b) Employer-Sponsored Retirement Plan, U.S. Series I Savings Bond, Health Savings Account (HSA), and 529 Education Fund.

Waiting till the end moment to save taxes
Many taxpayers commit the mistake of waiting till the end moment to begin considering tax-paying options. Such last-minute decisions often lead to large-scale one-time investments, which can affect one’s current financial needs and dissuade one from reaping the maximum benefits from tax-saving investments. The key is to begin investing in such securities from the start of the financial year, creating a systematic financial plan and following it through.

Not checking whether the investment should be in the taxpayer’s name only
Today, taxpayers have several options for tax-saving investments; however, each of these investments has different rules. For some investments and insurance plans, one can claim tax deductions even if the investments are made in a family member’s name, while in some others, the investments have to be in the taxpayer’s name. Therefore, not verifying these minute details before investing can lead to setbacks while filing tax returns.

Not claiming meal expense deductions
Although one can no longer claim 100% of meal expenses incurred during client meetings, 50% of specific business meals are exemptible per Meals and Entertainment Deduction policies. Thus, claiming such benefits can help one save tax money in the long run.

Not claiming mileage
Business owners can claim mileage if they use a personal vehicle for business purposes. Therefore, it is essential to provide supporting documentation to claim such benefits. For example, taxpayers using their vehicles for official errands can save considerably by claiming mileage benefits.

Not opting for endowment insurance policies
Endowment life insurance policies entail several tax benefits since the payable premiums are typically subject to tax exemptions. However, investing excessively in such policies can work against one’s financial plans; thus, the key is to zero in on specific endowment policies and claim tax benefits on the same.

Filling erroneous details
Lastly, filling in incorrect information while filing your taxes can cause rejection of the forms, leading to a delay in receiving your returns. Such delays over time can also lead to financial constraints and hassles. Thus, it is critical to ensure filling in all your details accurately.

Conclusion
In addition to avoiding the above mistakes, filing one’s returns on time and ensuring to claim all expenses is essential to avoid hassles and ensure a smooth process.

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