Tax season is here and some financial experts warn of common mistakes people make when filing.
“I think the most common mistake that that we see people make is forgetting to report certain income items, so it's those 1099s that you receive that you didn't realize you, you received income from a specific source," said Ryan Caldwell, the CEO of Wacker Wealth Partners.
This can also include crypto currency like Bitcoin and income from cash apps, including Venmo and PayPal.
Experts also remind people to keep track of deadlines.
“And if you receive an extension, always remember it's an extension to file your taxes, not to pay your taxes. So if you have an expected tax liability, you should take care of it before April 18 this year,” said Branden Welshons, a managing partner at Better Business Financial Services.
If the status of an individual changes, so can their tax liabilities.
“The IRS has different assumptions for what you should withhold if you're single versus you're married. And so that is a point at which I see a lot of folks withholding no longer represent their tax liabilities,” Caldwell said.
If you received advanced child tax credits, you’ll need to claim those. Tax experts say they are seeing some errors with the forms, so make sure the amounts match with what payments were received.
People may have a filing obligation.
“Maybe someone decided they want to buy a crypto currency this year, or maybe they opened up a Robinhood account. Well, those are new accounts that financial institutions and those are going to generate 1099s that you may not have received in the past,” Caldwell added.
People and businesses also exchange money using cash apps. The government expects records of that income.
“Venmo is cracking down because they're realizing that people are paying for services or business or product through, you know, it was a peer to peer,” clarified Welshons.
If someone is receiving business income through a cash app over a certain amount, they can use a 1099 to report income, but it may not be taxable.
Congress may pass parts of the Build Back Better Plan, and some financial experts warn of changes to tax laws, including the Roth conversions.
“They're talking about eliminating that ability for folks that make a certain amount of money, and they are talking about making that specific change retroactive to the beginning of the year,” said Caldwell.
Caldwell went on to say that if someone files a Roth conversion in 2022, that is going to affect the 2022 tax return.
This year's tax deadline is April 18.
