Filing your taxes can be a complicated process, so it isn’t unusual for people to make mistakes, many of which can be costly if you don’t catch them in time. Here are a few of the ones we see frequently and that we urge our clients to careful about:
Calculation errors: The errors we see the most often, every year, are mathematical. Mistakes in arithmetic or in transferring amounts from one schedule to another will get you an immediate correction notice. Math mistakes can reduce your tax refund or result in you owing more than you thought, so be extra cautious with your numbers.
Additional income equals additional filing work: If you did any independent contracting in 2019, you probably received a Form 1099-MISC detailing the extra earnings. If you earned income from savings and investment accounts, you should have received Form 1099 INT and Form 1099 DIV statements. In each 1099 instance, the IRS knows precisely how much extra money you made, thanks to the copies of your 1099 forms they received from payers. So make sure you include all of your income on your tax return. If you forget, the IRS will send notices as well as impose penalties and interest.
Missing a tax break: Even though the IRS is quick to point out when you fail to report income, they are not as thoughtful when it comes to informing you of missed deductions or credits. There are a number of tax credits and exemptions available to families and students of which you may want to take advantage. Tax credits such as the child or dependent care credit or those associated with education can substantially lower your tax bill. Don’t automatically take the standard deduction. Homeowners, in particular, should itemize their biggest deductions and see if they add up to more than the standard deduction amount.
Name changes: When the names of a taxpayer, his or her spouse, or their children don't match the tax identification number that the Social Security Administration has on record, the IRS may kick out or slow down the processing of the tax return. If there are name changes due to marriage or divorce, notify the IRS now so that the new name won't cause a problem when you file your tax return.
Direct deposit woes: Typically, the quickest way to receive a refund is to select the direct deposit option. Be sure to double check your bank account and routing numbers for direct deposited refunds or electronic tax payments. Entering incorrect information can result in a delayed refund or late payment penalties and interest.
Filing status mistakes: Marriage, divorce, or the birth of children can all affect your filing status. Make sure you know what each tax-filing status entails, and choose the one that best fits your personal tax situation.
Social Security number oversights: Since Social Security numbers are no longer printed on tax package labels due to privacy concerns, many people will forget to write theirs in where appropriate. Your tax ID number is crucial because there are so many transactions keyed to this number. Your social security number is also vital to claim several tax credits, such as the child tax and additional child tax credits, as well as ones for educational expenses and dependent care costs.
Complete charitable contributions: If you give to charitable organizations be sure to include the donations on your return as they could be valuable deductions. Follow the donation tax rules, the most important being that you must give to a qualified organization (one that has tax-exempt status with the IRS) and have receipts and/or acknowledgments to support the donation.
Select the most advantageous filing status: If you are married don’t automatically choose the married filing joint option to file your return. In many cases you may save overall federal and state tax by selecting the married filing separate option. Calculate your total tax bill both ways and choose the option that results in the least amount of federal and state tax.
Meeting the deadline: Don’t wait until the last minute, but if you do, make sure your mailed paper return is postmarked by the April filing deadline or that you hit "enter" to e-file your 1040 by midnight of the deadline day – April 15, 2020.
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