Tax Day is coming. You haven’t filed yet. In truth, you haven’t even started. Preparing a tax return can trigger paroxysms of stress at the best of times. If you’re rushing to finish your taxes ahead of the April 15 deadline, you may be rushing things. Between stress and haste, you could wind up making costly errors. Here, then, is a list of common mistakes people make before filing their taxes, adapted from a March 25 list published by the Illinois CPA Society. To honor the Land of Lincoln, we’ll inclu ...

Core Insights - The IRS has penalized taxpayers over $162 million for misusing tax credits, highlighting the importance of being cautious with online tax advice [1] Group 1: Tax Breaks to Watch Out For - The Fuel Tax Credit is legitimate but only applicable to businesses using fuel for non-taxable purposes, with penalties for misuse potentially reaching $5,000 [2][3] - The so-called "self-employment tax credit" is a misconception; the IRS clarified that no such credit exists, and related benefits were only available for specific COVID-19-related leaves [4][5] - Taxpayers hiring household employees must report their income and employment taxes, with a threshold of $2,800 in 2025 and $3,000 in 2026; fraudulent claims can lead to significant penalties [6][7] - Legitimate business expense write-offs are allowed for "ordinary and necessary" expenses, including mileage, home office use, and advertising [8]

Core Insights - Retirees face mandatory withdrawals from tax-deferred retirement accounts starting at age 73, which can lead to unexpected tax bills and penalties for non-compliance [2][3][7] Tax Obligations - Required Minimum Distributions (RMDs) are treated as ordinary income, impacting retirees' tax obligations and potentially pushing them into higher tax brackets [5][9] - Missing the RMD deadline incurs a 25% penalty on the required amount, with the possibility of reducing it to 10% if the shortfall is corrected within two years [4][8] Legislative Changes - Recent legislation, specifically SECURE 2.0, has reduced the penalty for missing an RMD from 50% to 25%, acknowledging that many errors arise from confusion rather than neglect [8] - The starting age for RMDs has been adjusted to 73, with plans for further increases for younger savers, emphasizing the urgency for those in their early seventies [7] Financial Implications - Large RMDs can lead to increased Medicare premiums due to Income-Related Monthly Adjustment Amounts (IRMAA), adding significant costs to retirees' healthcare expenses [9] - Qualified Charitable Distributions can satisfy RMD requirements without increasing taxable income, providing a strategic option for retirees [5]