There is no doubt our tax laws can be complicated. The continued expansion of our tax code, along with its complexity, helps to create a playground for common mistakes. Making one of these mistakes, no matter how small, may result in underpayment, over payment or delays on your refund.
Let’s go over some of the most common mistakes and make sure they do not get missed on this year’s return. Many of them are easy to avoid with a little attention to detail.
Incorrect Name or Social Security Number — If your name and Social Security numbers don’t match, your return will be flag by the IRS and you will be required to correct this error before it can be processed. If you changed your name since last year’s filing you will need to obtain a new social security card. You can do this by going to the SSA’s website at www.ssa.gov and filing out Form SS-5.
Incorrect Filing Status — Choose wisely as these five options could alter your tax bill. Make sure you know what each filing status necessitates and file under the one that fits your tax circumstances.
Claiming Dependents — A dependent is someone in which you provide more than half of their support. Each dependent exemption in 2013 is worth $3,900. Go to IRS.gov and look for IRS Publication 17 for details. Higher earners may find limitations on this exemption due to the alternative minimum tax or new “phaseout” provision.
Itemized deductions — This process can be complicated but please compare taking the standard deduction ($12,200 for joint filers and $6,100 for singles) to itemizing your deductions on Schedule A. This will allow you to figure out which deduction process trims your tax bill most efficiently.
Miscalculations — Double check your math; the IRS checks numerical entries against copies of your tax statements. These miscalculations may result in a correction notice and the IRS correcting your mistake and refiguring your taxes for you.
Charitable Gifts — Make sure you don’t overstate charitable gifts. Gifts of $250 or more must have a proper letter from the charity. Be sure and subtract the value of any goods or services received from the deduction. For instance, if you purchase a ticket to attend a charity dinner you must subtract the value of the dinner. Gifts of more than $5,000 require a qualified appraisal.
Net-investment-income tax — If you have an adjusted gross income of over $250K married ($200k if single) be sure to include the additional 3.8% tax on net investment income which took effect this year. Failure to pay the tax may result in penalties and interest.
Report of income — You will receive documentation and the IRS will receive a copy. Be sure and check the amounts you include on your return. If the IRS finds discrepancies, they will flag your account.
Direct Deposit — The IRS can direct-deposit refunds, but a wrong account or routing number may make it difficult to retrieve your refund. Please check this number carefully.
Sign and Date — Failure to sign and date your return is equivalent to NOT filing a return. If you are filing close to the deadline, this mistake could cost you penalties and fees. Also, if filing a joint return BOTH spouses must sign.
Deadline — If you plan to file after April 15, be sure to file an extension in order to avoid late or non-filing penalties.
Making a simple mistake can cost you in both monetary rewards and hassle from the IRS. Consider seeking the help of a trained tax professional when your taxes get too complicated. Paying a fee to avoid mistakes may be in your best financial interest.
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