5 Common Tax Mistakes You Can Avoid
Wednesday, March 8, 2017
It’s tax season again? Already!? Some of you may have already filed yours; but for those that haven’t, here are some mistakes you can avoid to prevent the IRS from causing you any trouble.
MisSing the tax deadline
When is the tax deadline for 2017? If you said, “April 15th”, you’d be wrong this year. It is actually April 18th in 2017. If that’s not enough, you can ask for a six-month extension — but you should know that all an extension does is give you more time to file your return. It doesn’t mean you can put off paying taxes you owe. You’ll still need to send payment of your estimated tax bill by April 18. Otherwise, you could face substantial penalties.
Filing your taxes requires a lot of numbers input. Bad math can result in a lot of headaches including owing more than you thought. Using a tax-software program to file your return can help reduce math errors. The built-in calculators do the work for you, adding, subtracting, and inserting numbers on additional forms as needed. But you still have to make sure your initial numbers are correct. Entering $3,500 when the real figure is $5,300 makes a lot of tax difference. Getting the numbers right is crucial because you can be sure the IRS will be double-checking numerical entries against its copies of your tax statements (W-2, 1099s and the like). When IRS examiners find a discrepancy, they’ll definitely let you know and, in many cases, will correct your mistake and refigure your taxes for you. Don’t give them the chance. Make sure your math entries are right!
Additional income REPORTING
Did you have a side job this year? If so, as a contractor you probably received a Form 1099-MISC detailing the extra earnings. What about savings and investment accounts? For these, you should have received Form 1099-INT and Form 1099-DIV statements. In each 1099 instance, the IRS knows precisely how much extra money (either as wages or unearned investment income) you made as soon as you did, thanks to the financial firms who sent copies of your 1099 forms to the tax agency. If you forget to include any of these earnings on your return, the IRS examiners will let you know you owe taxes on them, too. And depending on when your oversight is discovered, you also could owe penalties and interest on the unreported earnings.
Failing to Itemize Deductions
For many people, taking the standard deduction—$12,200 for couples or $6,100 for single filers—may seem like the simplest and easiest route when doing taxes, especially if they’re pressed for time. But itemizing your deductions can sometimes save you a bundle. If you’ve had large, uninsured medical expenses, made sizable charitable contributions, or paid a significant amount of interest or taxes on a home in the past year, itemizing may be worth your while. Not sure if itemizing is right for you? Take this quiz to find out.
Skipping the signature
One of the easiest mistakes is forgetting to sign your taxes! The IRS doesn’t process unsigned returns, so be sure to put your John Hancock where your forms require it. If you file electronically, you must use your personal identification number, or PIN, to sign your tax return.
In the eyes of the IRS, ignorance is not an excuse. Mistakes you make when filing your taxes are your responsibility. We hope these tips help you to file flawlessly and get the return you deserve. Happy filing!
[sources: bankrate.com, taxact.com, themuse.com]