Common Tax Mistakes to Avoid
With today’s taxation software and online tools, fewer common tax mistakes are made by law abiding citizens out there. All one has to do is to enter necessary information for the computer to give you an estimate on the taxes you’ll be paying and the refund you’ll be getting. Unfortunately, not everyone do their Math using a computer and half of the population still does it the traditional paper-filing way. For this, common tax mistakes arise, which can further contribute to the delay of the tax refund you are expecting to receive.
Here are the Five Common Tax Mistakes that You Can Avoid:
Human Error
Whether you file for your taxes electronically or not, entering the wrong data or missing data can greatly affect your tax return. This is a major common tax mistake that many have made – from entering incorrect accounts and social security numbers, to writing incorrect and missing data on your personal information. Make sure that if you’re filing the traditional way, fill out the forms with the least amount of corrections. Write legibly and reread your entries, from your name, address, zip code, spouse, dependents, to number of qualifying children. Did you enter the total number of exemptions? Check if negative amounts are entered in a bracket and that the form is filled with dates and signatures. Also, make sure to attach schedule and forms in the proper sequence, address your payments to United States Treasury, and use the pre-addressed label and envelope that come with your tax packet from the IRS.
Wrong Computation
The Internal Revenue Service, or the IRS, list this as one of the five common tax mistakes one can ever make. Make sure to check your tax tables and enter your income, credit, and tax deductions correctly. A bad math can lead to a future bill on your tax deficiency, and if you overpaid, the excess will be applied to your future taxes. You may also ask for a refund or payment review through written request. When you are calculating for equipment and supplies in your business, remember that equipment stands for those office items that last for more than a year, and supplies are those with short-term life span, like papers and pens.
Losing Track of Your Expenses
Many business startups use their personal cash to shoulder business expenses. There’s nothing wrong with that, but when it comes to filing taxes, you must keep track of the tiniest detail. For this reason, large companies have written rules on tracking company costs, deductibles, dividends, and interests. Since the IRS is the most effective tax collection agency in the world, by simply losing track of those that should have been declared, you can get a notice anytime on these unreported expenses, which can lead to you taking time on having this issue handled by your local tax resolution department. The IRS may not require you to show receipts that are less than $75, but it doesn’t mean you won’t need to have these expenses recorded. Also, your company can be in the habit of giving for a cause and when you do, have it recorded to be declared as a deductible business gift. You can be generous – but not too much., and make sure you give before the year ends.
Failing to Get Your Tax Breaks on Your Mortgage
Homeowners who had recently purchased a home with a Private Mortgage Insurance ( PMI ) should know that they can claim a tax deductible on PMI premiums. Although there are certain requirements on PMI paid between 2008-2010, it must be noted that your home loan should have been taken out on or after January 1, 2007. Also, if your vehicle is used for business, make sure you get tax deductions on the actual mileage expenses. Include the depreciation value of your vehicle. Talk to your tax professional on how you can avoid this common tax mistake.
Missing Deadlines
April 15 is the D-day for you to file your taxes and if you need more time than that, make sure you get yourself extra six months by requesting for it from the IRS and filing the Form 4868, or your application for automatic extension of time. This extension only applies to your paperworks, but the taxes and money you owe should be filed by April 15. Settle your dues on time to avoid this costly common tax mistake that can land you with more fees to pay for penalties and interests.
If you recently got married and had your name changed, you may visit the Social Security Online (
www.ssa.gov ) or call their toll free number 1-800–772–1213 for assistance. If you or your spouse are 65 years or older, make sure to file for a Form 1040. If you are employed, make sure your employer have a Form W-2 filled out for you. Fill out your Form 1099-R properly, indicating all the federal taxes withheld. Filing your taxes can be error-free if you take the time to prepare it ahead of the tax filing deadline. Avoid hassles, delays, and future notices from the IRS by avoiding these common tax mistakes!
RESOURCES:
Bell, Kaye. “ 10 Common Tax-Filing Mistakes to Avoid. “ February 2009. Bankrate.com.
http://www.bankrate.com/finance/money-guides/10-common-tax-filing-mistakes-to-avoid-1.aspx
Anthony, Joseph. “ 6 Common Tax and Bookkeeping Mistakes. “ 2009. Microsoft Small Business.
http://office.microsoft.com/en-us/officelive/FX102489561033.aspx
IRS.gov. “ Topic 303: Checklist of Common Errors When Preparing Your Tax Return. “ April 2009.
http://www.irs.gov/taxtopics/tc303.html
Schnepper, Jeff. “ Unlucky 7: The Top Taxpayer Mistakes. “ January 2009. MSN Money.
http://articles.moneycentral.msn.com/Taxes/CutYourTaxes/Unlucky7TheTopTaxpayerMistakes.aspx
