Avoid Common Mistakes When Filing Your Tax Return

The tax deadline is just a week away, and for those of you who still have not filed your return the IRS has put together a new press release sharing common tax filing mistakes Americans should avoid. You can find a snippet of the release below.

File electronically. If you e-file or Free File, tax software will do the calculations, flag common errors and prompt you for missing information.

Remember Making Work Pay. The Making Work Pay tax credit –– available in 2009 and 2010 –– is worth up to $400 for individuals and $800 for married couples. Most people got it as a reduction to their paycheck withholding. Form 1040 filers must complete Schedule M, attach it to their returns, and claim the credit to benefit from it. (Tax software handles these calculations automatically for e-filers.) Also, if you received the one-time Economic Recovery Payment, you need to reduce your Making Work Pay credit by that amount. Taxpayers who are not certain whether they received the economic recovery payment can find out with the help of an online tool, Did I Receive a 2009 Economic Recovery Payment? If you don’t have access to the IRS Web site, call 866-234-2942.

Claiming the Homebuyer Credit? If you claim the first-time homebuyer credit, complete Form 5405, and include it along with the settlement document, such as a HUD-1. More information is available on the homebuyer page.

Use the peel-off label if you mail a paper return. Paper filers may line through and make corrections right on the label. Be sure to fill in your Social Security number in the box provided on the return. If you do not have a peel-off label, fill in all requested information clearly, including Social Security numbers.

Check only one filing status. Also, check the appropriate exemption boxes. When you enter Social Security numbers, make sure they are correct.

Kerry Says $819,848 Tax Lien Is Clerical Error

From the AssociatedPress.com:

The Internal Revenue Service has filed a $819,848 tax lien against Sen. John Kerry's 2004 presidential campaign, but Kerry on Wednesday blamed IRS clerical error for the claim and said his campaign owes no tax penalties.

The Massachusetts Democrat said the IRS mishandled payroll tax forms that he said were correctly filed by his campaign in 2005.

"This is a clerical matter, nothing more, nothing less," said Kerry spokeswoman Whitney Smith.

IRS spokesman Anthony Burke declined comment Wednesday, adding that IRS employees are precluded by law from commenting on tax cases.

The IRS notified the Kerry campaign in January 2008 that it had failed to file certain payroll tax forms for the 2004 tax year.

Smith said the IRS must have lost the payroll forms since the Kerry campaign had previously filed them in 2005. But the Kerry campaign filed them again in 2008 in response to the IRS request, she said.

"The IRS contacted us last year about data they lost from the 2004 campaign," Smith said. "We gladly resubmitted all the forms needed to fill in the gaps, end of story."

Smith said the Kerry camp was surprised to learn the IRS had filed a tax lien based on the disputed W-2 payroll forms.

The IRS filed the lien earlier this year in the District of Columbia, saying it had tried to collect the money previously from the Kerry campaign.

"We have made a demand for payment of this liability, but it remains unpaid," according to the IRS tax lien.

Smith said the Kerry camp has been willing to provide the IRS additional documentation to resolve the matter. Kerry officials have been checking monthly with the IRS asking why the matter has yet to be resolved, but have not gotten an answer, she said.

The Washington Times first reported the tax lien against Kerry's campaign on Wednesday.

Kerry lost to former President George W. Bush in the 2004 race. Paperwork was filed last year with the Federal Election Commission closing down Kerry's 2004 campaign account.

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.