Any procedure as complicated as tax reporting is going to be subject to a multitude of common errors. Unfortunately, tax return missteps can cause unnecessary stress and set you back financially. Avoid both by learning from the most common taxpayer mistakes.
It's safe to say that most taxpayers prefer to keep their relationship with the IRS from getting personal. If you agree, your best strategy is to prepare and submit a tax return that is free from ambiguities and red flags. But not making waves doesn't mean paying more in taxes than you have to. Minimize your tax liability and keep the IRS happy by avoiding these common filing mistakes.
1. Overlooked tax credits and above-the-line deductions
Each year, the taxman collects millions of dollars in overpaid taxes thanks to taxpayers who don't claim all of the deductions and credits available to them. Many of these opportunities are available for everyone, even those who don't itemize. The so-called 'above-the-line' deductions include student loan interest, tuition expenses, moving expenses, and alimony paid. Tax credits are available for child and dependent care expenses, education expenses, and IRA contributions made before April 15th of the following tax year.
2. The standard deduction
Itemizing your deductions may be more complicated, but it will often save you money. By itemizing, you can reap tax benefits for your mortgage interest, charitable contributions, non-reimbursed employee expenses, and qualified medical and dental costs. You should also pay attention to the extended deductions, which are easy to overlook: state sales taxes paid, educators' out-of-pocket expenses, and tuition and fees. Extended deductions aren't mentioned on your tax forms, because they were approved after the 2006 forms went to print. Most professional tax preparers and the major brands of tax software have adjusted their forms to provide tax help on these deductions.
3. Incomplete documentation
A complete set of supporting documents is vital to the efficient processing of your return. If the IRS cannot verify the information that you provide, it may decide to make its own adjustments. This might mean smaller tax refunds for you or, worse, larger tax bills. Avoid these unpleasant surprises by including all required income and deduction documentation.
4. Typos and calculation errors
Once you have your deductions and credits sorted out, you might feel the urge to get that return in the mail as soon as possible. But wait-typos and calculation errors can cause mass confusion and processing delays. If you input your bank account number incorrectly, for example, your direct deposit refund could end up somewhere else, or nowhere at all. More common mistakes include incorrect social security numbers and inaccurate arithmetic. Double-check your return for math and typos before you take it to the post office.
Somewhere, an IRS employee is breathing a sigh of relief, because there'll be one less tax return flagged for an incorrect social security number. And when the IRS is happy, you're happy too.
By:MortgageLoan.com
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