The seven deadly tax sins you'll be paying for now and later

Jun 19, 2013

It's a painful task for most of us, yet when it comes to filing our  tax returns it seems many are committing the seven deadly sins and heading  straight to money hell.     

But a leading tax expert says we can at least head straight to tax purgatory  and even heaven if we avoid some of the most common pitfalls and mistakes.

According to Adrian Raftery, people are setting themselves up for massive tax  fail by not declaring income, failing to lodge returns correctly or not at  all.

The author of 101  Ways to Save Money on your Tax - Legally! said taxpayers were depriving  themselves of legally legitimate entitlements by committing some, or all, of the  seven deadly tax sins.

He said taking shortcuts and simple laziness, by not keeping receipts and  being dishonest with income earned, topped the list of worst offences  committed.

Greed in claiming things they're not entitled to, carelessness, and arrogance in thinking they know more than an accountant will also send people straight to taxpayer hell.

"Some people mistakenly think if they don't claim the full amount they're  entitled too, then they will stay under the ATO's radar and avoid being  audited," he said.

"But if you're legitimately entitled to claim the full amount then they  simply should."

He added that many people also believed it was easier and faster to do it  themselves, but a qualified accountant could pick up a lot more than the average  person.

With that in mind here is the list of the seven deadliest tax sins.

1. Laziness:

Mr Raftery says not keeping receipts, log books and even diaries noting work  hours can cost you dearly. Failing to properly document out of pocket medical  expenses and not keeping spreadsheets for expenses will also cost you.

"People can claim $10-20,000 in tax deductions if they have a log book for a  car used for work but if they don't have this, they can only claim the minimum  $3750."

2. Dishonesty:

Not declaring foreign income, additional payments, and shares will also have  the tax office after you quicker than you can say PAYG. Mr Raftery said the ATO  was data-matching over a billion transactions and were looking at 600,000  taxpayers.

"This process is quite lucrative as almost $1.2bn in tax revenue was  generated last year due to an audit investigation by the ATO," he said.

3. Greed:

Over-claiming is asking for trouble, especially when it involves things such  as claiming on rental properties and negative gearing, Mr Raftery warns. This  can include claiming too much for repairs, interest on loans, borrowing costs  and depreciation.

"The last thing you need is a knock on the door from the taxman because you  claimed too much," he said. 

4. Arrogance:

Thinking you can do a better job is not only silly but may cost you more in  the long run, Mr Raftery says.

"Remember an accountant is a professional and acts in the same way as a  mechanic in a way," he said. "Anyone can change a tyre but a mechanic can  recognise potential problems and fix minor errors which can end up costing you  more down the track."

101 Ways to Save Money on Your Tax - Legally! 2013 - 2014 

5. Stupidity:

Mathematical errors could result in big mistakes and a massive tax bill  later, according to the author.

"A wrong number here or a bad calculation there may cost you thousands," Mr  Raftery said. "So if you do your return yourself then make sure you measure  twice and avoid any unnecessary headaches."

6. Forgetfulness:

Not lodging at a tax return or forgetting to file one falls under this  category of tax sins. Mr Raftery said people were losing thousands by not  lodging their returns. He said he had one client who had 33 years worth of  returns and ended up getting a $70,000 refund.

7. Carelessness:

The last thing people should do is check and double check they have all the  correct information and documents, which should be maintained for 364 days of  the year, not just one. Mr Raftery says just by taking more care with keeping  receipts and grazing through every line of all bank accounts and credit cards  can make a big difference.

"There are a myriad of deductions you might be missing out on," he said. "But  if you have more than $300 worth of total deductions then you must have  documentary evidence of that full amount."

 

This article was first published on www.news.com.au and can be found here and also appeared in The Australian.

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