The process of filing a tax return can be daunting for many Americans. The tax code in the United States is highly complex. Not only do taxpayers have to consider their salaried income, everything from savings account interest to income from the sale of a property needs to be taken into account.
The good news is that there are numerous resources out there that can help you compile an accurate tax return. Before you start filling out your tax paperwork, consider these common tax filing mistakes.
Social Security Number Transposition
Having a social security number transposed on your tax return is the quickest way to have your return rejected by the IRS. Take a minute and double check every social security number on your return.
Did you get married last year, but haven’t bothered to change your last name with the Social Security Administration? If so, you’ll want to use your maiden name when filing your tax return. The IRS matches up both your social security number and name.
Incorrectly Claiming Dependents
Do you have a child who is recently married or a college student? Oftentimes, parents of these individuals will file their tax return only to realize their child has already filed on their own. Be sure to have these discussions with your child before either of you file your taxes.
Inflating Charitable Contributions
It is very easy for the IRS to send you a letter asking you to provide documentation supporting your charitable contributions. Don’t fall into the habit of using the same number as in previous years, as that approach can come back to haunt you.
Incorrect Direct Deposit Information
Have you already spent your refund and need it to pay off your credit card? Having the IRS deposit your refund directly into your checking account is a great way to speed up the refund process. Make sure you double check that your account and routing numbers are up to date. The time and cost of tracking down and reassigning your refund are not worth the 30 seconds it takes to verify your direct deposit information.
Missing 1099 Reporting
Did you sell some stock at a loss? Even though you may think a 1099 is insignificant, failing to report one on your tax return will almost always generate a notice from the IRS and may be costly to resolve.
General Math Errors
Be careful when you’re preparing your tax return that you don’t accidentally report a number incorrectly. Unfortunately, this is easier to do than you think. The difference between the taxes paid on an income of $89,000 versus $98,000 is significant. Even worse, adding an extra $0 will cause problems. Take a minute to look over your return prior to filing.
Missing Credits and Deductions
It is very important to stay current on tax law to ensure you’re taking advantage of all credits and deductions available to you. The tax code is complex and ever-changing, and missing out on a credit or deduction can be devastating.
Aggressive Home Office Deduction
Just because you occasionally log in from your home computer to look at something work-related doesn’t necessarily mean you can deduct half of your house as a home office expense. For those eligible for a home office deduction, consider looking into the Safe Harbor Allowance.
Have you been putting off filing your return because you’re mad at the IRS, or because you owe money and don’t want to pay it? Not filing your tax return could be very costly in penalties, interest and disallowed refunds. Owing isn’t the end of the world, as the IRS will work with you to make payments. Waiting too long to file and then realizing that you are ineligible to claim can have devastating consequences on your wallet.
The key to filing an accurate tax return is being informed of the tax code, asking questions when necessary and maintaining accurate records. If you have questions regarding your tax return, don't hesitate to contact our knowledgeable team of professional accountants.
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