We all make mistakes, that’s why they put erasers at the end of pencils, right? This little life rule may be true for most things, but there are times in your life when you really can’t afford to be making mistakes, one of which is when filling out your tax returns. As it happens, it’s more common than you think for people to make mistakes on even these critical documents. The following mistakes that many people make should be all the proof you need that proper know-how and a tax compliance accountant are essential!
- Making Erroneous Claims
Top of the list of common mistakes is people making deduction claims that are invalid. Hopefully these deductions are made out of genuine error, and not wilfully. One of the reasons that this can become such a problem is that too many deductions of the wrong sort could lead to a very serious auditing of your finances, which in turn finds other irregularities which could be interpreted as criminal action rather than sheer ignorance.
Typical valid deduction claims include things like the cost of using your car to go and visit suppliers or attend meetings with clients. It’s also valid to claim the cost of driving from one work site to another. However, a common mistake here is including the cost of driving from your home to your workplace, or vice versa. These journeys don’t count.
- Inflating Deductions
Even when deductions listed are correct and valid, another common mistake people make is to over-inflate them. This one requires a great deal of additional care because inflated deductions look far more deliberate than purely erroneous deductions. The ATO may understand that someone wrongly claimed driving expenses for their journey to work from home, but saying for example that a set of tools you needed cost $300 when they actually cost just $150 is harder to explain.
If you are discovered embellishing your deductions in this way, then the best-case scenario is that you are made to repay any tax that you’ve avoided, plus an interest rate of about 9 percent. If they think you’ve intentionally done it, then there are additional penalties. The worst-case scenario is that you’ll have to pay up to 95 percent of the tax avoided.
- Send in Pre-Filled Data Without Checking It
In recent years, the ATO has taken steps to try and make filling in tax information online a lot easier. One thing they’ve done is make it so you can enter in a lot of pre-saved information directly into your forms, a lot like Google Chrome’s “Autofill” feature. People think that because this information is saved within ATO’s system, that nothing can go wrong, but this is wrong-headed.
The problem is that sometimes the ATO information is incomplete, which can leave key data out and thus leave you with an incomplete or incorrect statement. At best, it might mean some personal details are wrong, but at worst it could mean you declare completely the wrong amount of income, which can lead to more serious consequences.
- Not Reporting Changes in Personal Information
Mistakes regarding a change of address that you didn’t report to the ATO are not as serious as some of the above problems, but they will lead to delays in your return, and that’s still irritating. Be sure to inform the ATO of any key changes to your personal information before it’s time to file the return. If you send new information that doesn’t match information on file, then that’s when the delays will come in.