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    Home»Education»Tax Troubles: The 5 Most Dangerous Tax Mistakes (and How to Avoid Them)
    Education

    Tax Troubles: The 5 Most Dangerous Tax Mistakes (and How to Avoid Them)

    Paloma GonzaloBy Paloma GonzaloMarch 7, 2023No Comments3 Mins Read
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    Tax laws are so complex and confusing that you can end up in trouble, even if you have the best intentions. To ensure you navigate the system effectively and stay on the right side of the law, avoid the following dangerous tax mistakes:  

    1. Filing your taxes late

    If you find yourself typing “income tax calculator 2022” into Google in 2025, you know you’re in trouble. Filing your taxes late can lead to massive financial penalties that pile up in tandem with the ever-increasing stress of knowing that you’re digging yourself into a pit with the IRS. 

    According to the IRS, if you have a tax debt and file late, the penalty will generally be 5% of whatever you owe for every month (including part months) that your return is late. This can accrue up to a maximum of 25%. So, if you suspect you won’t be able to get your tax return in on time, it’s essential to file for an extension as soon as possible. 

    2. Falling for tax scams

    Each tax season, scammers around the world rub their hands together in glee, knowing that they have the perfect opportunity for making easy money from unsuspecting victims. Scammers may use phishing attacks to steal your identity, lodge your tax return, and claim your refund. Or they may engage in even more complex attacks that involve convincing you that they’re from the IRS and you must pay a penalty. 

    With each passing year, the tax scams grow more sophisticated, so it pays to stay up-to-date with the latest attack vectors. This is the best way to protect your personal data and avoid falling victim. 

    3. Failing to report an income source

    Whether you do it on purpose or by accident, failing to report a source of income can have grave consequences. At best, the IRS will catch up to the discrepancy and bill you for the outstanding amount. At worst, you could be subject to a criminal investigation. 

    4. Thinking crypto is tax-free

    Bitcoin was launched as a decentralized currency, ostensibly allowing people to avoid all the rules and regulations of fiat money. However, that doesn’t excuse you from the tax obligations associated with earning money. 

    Your government wants a chunk of any crypto gains you make, and cryptocurrency is one of a number of areas the IRS is paying special attention to in the 2020s. Failing to report money made via crypto can have dire consequences, so it simply isn’t worth the risk. 

    5. Misinterpreting tax laws

    The scariest element of filing your taxes is the fact that if you misunderstand something and get your tax return wrong, you’re not going to get a lot of sympathy from the IRS. Add to this the fact that tax laws are vast, complex, and written in incredibly obscure language, and you have a recipe for potential disaster. 

    Many people have found themselves lumped with massive tax bills and fines to boot after innocently getting something wrong on their tax returns. So, if you switch from being an employee to launching your own business or otherwise enter into a more complex tax situation, it’s worth consulting a professional for guidance. You may save money in the short term by handling your taxes yourself, but if you get something wrong, you’ll be alone in dealing with the repercussions. 

    While this list isn’t exhaustive, you’ll be well-equipped to keep the IRS off your back if you avoid these critical tax mistakes. 

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