Knowledge about tax laws and the tax code allows individuals to reduce their liabilities while increasing their savings. Along with this obvious benefit, taxpayers also learn to avoid owing back taxes by keeping up with tax policy changes.
Sometimes, individuals miscalculate their taxes because they’re not aware of the expiration of a tax break. Even when they believe that they are paying the correct amount of taxes owed, they may underpay and wind up with a tax debt.
In order to calculate the correct amount of taxes owed, it’s important to take the correct deductions and only claim credits that you qualify for. Also, it’s a good idea to check for changes in eligibility that may have taken place over the last year. Claiming credits and deductions that you do not qualify for can lead to back taxes, regardless of your intentions.
After discovering a falsely claimed credit or deduction, the IRS recalculates the amount of taxes owed and sends a notice to the taxpayer. Non-payment of back taxes can lead to IRS collection actions. In order to avoid tax debt or any legal complications, it’s important to know the qualifying requirements of every credit and deduction that you claim on your tax return. When in doubt, it’s always better to overpay than to underpay.