3 Costly Tax Mistakes to Avoid in 2024

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The wrong tax moves could cost you big time. Read on to learn which ones you’re better off avoiding this year at all costs. 

Paying taxes is a part of life for all of us. And unfortunately, mismanaging your tax situation could result in a hit to your personal finances. So could falling victim to certain blunders on your tax return. With that in mind, here are three mistakes to steer clear of in 2024.

1. Submitting an inaccurate return

Between now and mid-April, you’ll probably spend some amount of time working on your 2023 tax return. Coming up with all of the right details for that return might be more time-consuming than, say, guessing at different numbers or doing your best to estimate them off the top of your head. But the latter might cause you a serious headache — and cost you money at the same time.

Mark Steber, Chief Tax Information Officer at Jackson Hewitt Tax Services, says, “I see many people assuming if they’re ‘close enough’ that it won’t cause any issues, but that couldn’t be further from the truth. Accuracy matters. This is especially true when reporting income, either from W-2, 1099s, or any other documentation because not only is the company sending you this tax form, but it’s also being sent to the IRS. If it doesn’t match what is in their system, it could cost you via penalties and interest.”

So, let’s say you remember earning about $3,000 from a freelance client you did work for. Don’t just put “$3,000” on your taxes and assume that’s good enough. If you earned $3,024, that’s the number you need to report. Period.

Similarly, if you earned exactly $421 in interest income from your savings account, you need to say so. If your bank doesn’t send you a 1099 form with that number, log into your account to see if there’s a form waiting or call your bank and ask for help.

2. Not tracking the freelance income you earn or related expenses

If you’re self-employed, whether on a partial or full-time basis, you’re required to report all of your income. And it’s on you to track your earnings and make sure you’re giving the IRS a complete picture.

Don’t just rely on your various clients to send you a 1099 form when they’re supposed to. Instead, come up with a record-keeping system that allows you to track your earnings carefully.

At the same time, some work expenses you incur as a freelancer could serve as a tax deduction when you file your return. Track those carefully, too, so that you know what you’re able to claim. And hang onto all of your receipts, as you may need those to back up your claims.

3. Waiting until the last minute to file taxes

Taxes are due this year on April 15, though the IRS will allow filers to submit their returns as early as Jan. 29. You don’t necessarily have to file your taxes at the end of January. And that may not be feasible if, come that point, you haven’t received all of your tax forms. (Companies and institutions are supposed to issue 1099s by the end of January, but compliance is a different story.)

But one thing you definitely do not want to do is wait until, say, April 12 to start working on your taxes. If you find yourself having to rush through the process, you could end up missing out on valuable tax breaks you were entitled to claim.

Take a look at your calendar and carve out some time in February or March to start working on your tax return. That way, you’ll also have ample time to follow up if you find that you’re missing key forms.

The wrong tax moves on your part could end up costing you money. So do your very best to avoid these three this year.

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