Avoid These Common Tax Mistakes That Can Cost You Big
Finished your tax return already? Before you file, slow down and check your return one more time against this checklist of common mistakes people make when preparing and filing their taxes:
Tax Mistake #1: Not Using Tax Software
Unless you have the simplest of returns--not much more than a W-2 form and interest income--you should use a tax program. It can help you find deductions and other items you might otherwise miss. When you find just one more receipt, you'll be more likely to enter it when your tax forms recalculate automatically. You'll avoid simple math mistakes, too.
Tax Mistake #2: Filing Separately If You Are Married
Most married people pay less tax if they file jointly. Using tax software, you can try it both ways and easily see the difference.
Tax Mistake #3: Always Filing as "Single"
If you have a child or other dependent living with you, using the right filing status significantly lowers the amount of tax you owe. File as "Head of Household" or "Qualifying Widow(er)" whenever possible.
Tax Mistake #4: Missing Dependency Exemptions
Dependency exemptions are not just for small fry. If you support a parent or older child, even if they don't live with you, you may be able to take an exemption.
Tax Mistake #5: Missing the Child Care Credit for Non-Dependents
This happens often. In the case of split spouses, whomever has the kids living at home often assumes he or she can't take the credit for child care expenses because the ex is taking the dependency exemption. The child care credit and the dependency exemption are two separate issues--you can qualify for one but not the other.
Tax Mistake #6: Forgetting Income, Especially Dividends and Interest
If you get a Form 1099 from the bank or brokerage, you'd better report the income. When the IRS computers compare their copy of Form 1099 with your return, they'll get their tax regardless of whether you've reported it, plus interest.
Tax Mistake #7: Missing Tax Deductions
Have you taken any of the following common tax deductions? If you haven't, but think you might qualify for one or more, be sure to find out which ones you can claim and save more on your return:
- Volunteer expenses, including mileage for volunteer work.
- Non-cash charitable donations, such as used clothing or furniture.
- Job-hunting expenses, including mileage, business cards, subscriptions to job websites and admissions to job fairs.
- Points and expenses on home mortgages. (Costs of refinancing must be spread out over the life of the loan.)
- Tax deductions for self-employed persons, such as deductions for health insurance, a home office and the deduction for half of self-employment tax.
- Education tax deductions and credits.
Tax Mistake #8: Not Double-Checking Personal Information
People forget social security numbers, addresses, even how to spell their own names. After slogging through all those forms, we miss the easy stuff!
Tax Mistake #9: Not Making a Copy
If you need a copy of your tax return later on, for example, when you apply for a loan, you could pay $57 for the IRS to send you one. Make a copy of your return before you mail it in to be sure you never have to pay this easily-avoidable fee.
Related Posts:
- How to Choose Tax Preparation Software
- 10 Common Tax Deductions You Shouldn't Miss
- When to Say Goodbye to Your Accountant
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