Tuesday, January 06, 2009

Top 10 Most Common Tax Prep Mistakes

Between piles of paper work lists of numbers to crunch, it is not hard to miss a thing or two when you are preparing your federal and state tax returns. However, some mistakes could lead to the loss of a valuable deduction, or even worse, an IRS penalty. To help the readers of my blog this tax season, I have put together this list of the top 10 most common tax prep mistakes.

1. Not Checking Math

Before sending in those forms, go over your math a few times to make sure your return is 100% accurate. You could get fired, or even audited if you add an additional zero somewhere, or put a decimal point in the wrong spot. Crunching the numbers one last time is more than worth taking such a risk.

2. Not Listing All Jobs

If you worked in more than one job this year, you need to make sure that you list them all on your tax return. If you do forget to list any income, you could be accused of tax evasion. Rather than go through all the hoops that tax evasion will put you through, make sure to list any and all sources of employment, no matter how long or short they were.

3. Incorrect or Missing SSN

It is imperative that you put your social security number (SSN) on your tax forms. Even more importantly, the number that you list must be correct. In addition to correctly listing your SSN, if you want to be extra cautious, you can go a step further and also write your social at the top of each page. This way, if the IRS misplaces a form, they will know just who it belongs to.

4. Charity Misinformation

Making a charitable donation is more than good for your karma; it is good for reducing your tax liability. However, the IRS is becoming stricter with contributions, and if you forget to list the charity correctly on your tax forms then you will receive no deductions. It is also important to list the correct contact information for the charity, so the IRS will not think that you are trying to get away with a false claim.

5. Listing Wrong Marital Status

Even if you were divorced fairly recently, it is still necessary to list your current marital status. The IRS is going to get suspicious when your ex-spouse lists themselves as single and you do not. Although it is not technically tax evasion, there could be financial penalties involved if the IRS chooses to audit you.

6. Miscalculated Childcare Costs

Children and students of all ages require large amounts of funding for everything from childcare to education costs. Fortunately, the IRS allows you to deduct expenses spent on childcare. However, these credits have many qualifications, so make sure you are fully qualified before you submit your forms.

7. Forgetting to List Unearned Income

Believe it nor not, the IRS already knows how much unearned income you have made this year. In addition to forms like 1099, the IRS also has the ability to monitor your bank account activity. To avoid penalties and fines, keep good track of your unearned income throughout the year and list it all on your tax return.

8. Missing the Deadline

Missing the April 15th deadline is not the worst mistake you could make... unless you also forget to file for an extension. An extension gives you an additional 6 months to file your return forms, at no additional costs.

9. Not Using IRS Mail Material

The IRS sends you pre-addressed envelopes for a reason; they have the correct info already on them. It also makes the return sorting process much easier since they addresses are clear and easy to read. Writing your own mail material could lead to a longer return time or even the chance of it getting sent to the wrong place and lost in the mail. This one's easy to follow, just keep and use their free mail material.

10. Missing Signature

It is surprising this mistake even makes the list, but sadly it is true. For some reason when people are flustered over crunching numbers and attaching receipts, they forget important details like signing the documents—possibly because the signature and date is often the last are often the last things to do. However, your signature is what makes it genuinely yours, and the IRS will not take your return without it.

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