Tax season is over, and millions of Americans are breathing a sigh of relief now that the April 15 deadline has passed. But what if you thought you received a big refund and were celebrating, only to realize that you might have missed out on a few dollars? According to tax experts, there are several common traps that many taxpayers fall into, and avoiding them can lead to smarter financial decisions all year round.
Filing by April 15 Isn’t Always Necessary
One of the most popular misconceptions about taxes is that filing by April 15 is the only option. However, this isn’t always the case. Mark J. Kohler, M.PR.A., C.P.A., J.D., and Timothy Wingate Jr., an IRS-certified tax specialist, say that filing your return on that day isn’t always required or even wise. “Contrary to popular opinion, it’s not the end of the world if you don’t file your personal 1040 tax return by April 15,” Kohler said. “In fact, it can be very strategic to not file and instead submit an extension. Getting an extension gives you time to get all your records in order.”
How to File an Extension the Smart Way
According to Wingate, filing an extension the right way can be beneficial:
- Mail Form 4868: “File an extension by mail with the form 4868. Make sure you send it in certified mail with a return receipt,” Wingate says.
- Work with a pro: “You can file an extension with a tax professional who uses ProConnect Tax Online to make sure it is completed correctly and timely.”
- Paying up front: “If you owed money to the IRS last year, you can pay the same amount by the tax deadline to avoid any penalties when filing your extension.”
A Big Refund Isn’t Always A Good Thing
Many taxpayers celebrate a large refund check, but this mindset needs to change. Kohler says that a big refund can be a sign of missed opportunities for tax planning. “Our number one cost in life is taxes,” he said. “If we can minimize that, we can deploy that money in other areas that make us money. That’s the concept of tax planning.”
Rather than aiming for a big refund, aim to owe nothing — and keep more of your paycheck throughout the year.
How to Minimize Your Tax Liability
To reduce your taxable income, consider the following strategies:
• Adjust your withholdings to ensure you don’t owe money at the end of the year. • Contribute to retirement accounts to reduce your taxable income. • Make strategic investments to minimize your tax liability.
Not Running Your Side Hustle Like A Business
With nearly 40% of Americans working a side hustle, treating that income seriously is more important than ever. Kohler says that side hustles are tax planning opportunities that many people miss out on. “Side hustles aren’t just income streams — they’re tax planning opportunities,” Kohler said. “But too many people miss out because they don’t keep records or claim expenses.”
How to Run Your Side Hustle Like A Business
To take full advantage of tax planning opportunities with your side hustle, consider the following:
• Keep separate accounts for business income and expenses. • Track all expenses, including home office expenses, internet and software costs, mileage and vehicle expenses, equipment and supplies, business travel and meals, and accurate record-keeping is essential. • Consult a tax professional to ensure you can claim deductions and potentially lower your overall tax bill.
Conclusion
Tax season may be over, but the lessons learned can last all year round. By avoiding these common mistakes, including filing blindly by April 15, celebrating big refunds, and ignoring your side hustle’s business status, you can keep more of your money and make smarter financial decisions. Work with a trusted tax advisor, file smarter (not faster), and take full advantage of deductions and planning strategies year-round. Your future finances will thank you.
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