It’s all too easy to make errors on your tax return. Usually, a small mistake on your tax return isn’t the end of the world, but it could mean you’ll pay extra money you weren’t anticipating. And regardless of whether you make a big or small error, you’ll find that correcting the mistake is a hassle.
Avoiding errors from the get-go is a better approach. Thankfully, experts have set out a lot of tips for you to nip problems in the bud. And in this blog entry, we’ll give you a fly-by of the tips offered in The Ernst & Young Tax Guide (which is definitely worth a read if you want the full gamut of advice). But here, we’ll take a brief survey of their advice.
Before diving into your tax return, it’s crucial to gather all the necessary documents to ensure accuracy and completeness. Start by collecting your W-2 forms from your employer(s) and any 1099 forms for freelance work, interest, and dividends. Don’t forget receipts for itemized deductions, such as mortgage interest, charitable donations, and medical expenses. If you have business expenses, make sure to have all relevant receipts and bank statements on hand.
You’ll also need the Social Security number or Individual Taxpayer Identification Number (ITIN) for yourself, your spouse, and any dependents. Having last year’s tax return can be helpful for reference, especially if there are carry-over items.
Double-checking that you have all these documents before you start will help you avoid common tax filing mistakes, such as missing or inaccurate information. This preparation step is key to a smooth and error-free tax season.
To be fair, there are far more than 25 possible mistakes you can make on your tax return. These are just some of the most common ones.
The most important thing you should do before you submit your tax return is to check your math. Rest assured that the IRS will! To avoid overpaying or underpaying your tax due, make sure that you check your math in each section of your tax return.
Double-check that you’ve written your correct social security number on your return. Plus, if you have a spouse, make sure their number is properly listed on the return. This should be included regardless of whether you’re filing a joint or separate return.
This tip is especially important if you’re filing paper forms for your return. It’s possible for the IRS to accidentally misplace a page from your return, delaying your refund and causing a lot of hassle. If you include your SSN on each page of your return, any misplaced pages can quickly be reunited with the rest.
It’s easy to remember the dependents that live with you and claim them on your return. But you could have other dependents. A common example of a non-resident dependent could be elderly parents that don’t live with you. Don’t forget to claim every dependent you have.
Be sure to include the Social Security number for each dependent you list on your return. Ensure that each SSN is correct, too.
If you are single and have a dependent who lives with you, check to see if you qualify for the lower tax rates available to a head of household or surviving spouse. Selecting the wrong filing status can place you in an incorrect tax bracket and make you ineligible for certain deductions and credits.
You may be eligible for the earned income credit if you do NOT file as married filing separately. If you have one qualifying child and your earned income and modified adjusted gross income for 2024 are less than $50,434 (this number rises if you have more than one qualifying child), you may qualify. If you do not have a qualifying child, but are between the ages of 25 and 65, and your earned income for 2024 and modified adjusted gross income are less than $19,104, you may qualify as well.
For many married taxpayers, a “married filing jointly” return is more beneficial based on the different income tax thresholds for different tax brackets. But in some cases, it might be more beneficial to go the “married filing separately” route. If in doubt, consult with your tax professional.
To avoid unnecessary (and probably unwanted) correspondence with the IRS, be sure to attach a copy B of your W-2 forms to your tax return. If you received a form 1099-R showing Federal income tax withheld, attach copy B of that form as well.
If you are blind or 65 years of age or older, you might be eligible for additional standard deductions. Don’t overlook these if you qualify.
A check to the IRS should be a bit more detailed than the typical check you write. Be sure to sign your check and write your social security number, the form number, and the tax year on the face of any checks made out to the IRS. For example, you could include “000-00-000 – 2024 Form 1040″ in your memo line to be very clear.
Be sure that your Form W-2 and all Form 1099s are correct. If they’re wrong, have them corrected as soon as possible so that the IRS’s records agree with the amounts you show on your return. Discrepancies in these forms can cause delays and audits.
Accurately filling out tax forms is crucial to avoid common mistakes during the filing process.
If you work for more than one employer, there’s a chance that both employers withheld extra Social Security and Medicare taxes from your wages. If that happens, you’ll have overpaid those taxes for the year, so you’d get a credit for them. Don’t miss that opportunity.
If you received a state tax refund or a refund of interest you paid on a mortgage in an earlier year, make sure you have not included too much of your refund in your income. These refunds may not be taxable if you did not get a tax benefit from deducting them. If, for example, you used the standard deduction in the year in which the taxes or interest were paid, you do not have to include the refund in income this year.
Deductible real property taxes should be distinguished from assessments paid for local benefits, like repair of streets, sidewalks, sewers, curbs, gutters, and other improvements that tend to benefit specific properties. Assessments of this type generally are not tax deductible.
After ploughing through the endless rows of your return, it’s easy to neglect your signature on accident. be sure to sign and date your return, and confirm the occupation you’ve listed. If you are filing a joint return, be sure that your spouse also signs as required.
If you claim Social Security benefits, only a portion of those benefits may be taxable. If your income does not exceed a certain amount, none of it may be taxable. Be sure to get the correct calculation for these benefits.
Check last year’s tax return to see if there are any items that carry over to this year, such as charitable contributions or capital losses that exceeded the amount you were previously able to deduct. If you used a tax software last year and use the same one this year, the software may automatically prompt you to do this.
If you can be claimed as a dependent on someone else’s return, do not claim a personal exemption on your return. Your standard deduction may be limited as well. If you think someone may be claiming you as a dependent (for example, your parents if you’re a college student or live with them), be sure to confirm with them what your status is.
Ensure that you fill out Form 8606, “Nondeductible IRA Contributions,” for your contributions to an IRA account, even if you don’t claim any deduction for the contribution.
Recheck your basis in the securities that you sold during the year, particularly shares of mutual fund. Income and capital gains dividends that were automatically reinvested in the fund over the years increase your basis in the mutual fund and thus reduce a gain or increase a loss that you have to report. Also any “front end” or purchase fees are still considered part of your cost basis for tax purposes, even though they reduce your investment in a mutual fund.
Recheck that you have used the correct column in the Tax Rate Table or the right Tax Rate Schedule for your filing status. This is an easy mistake to make, but it can be a costly one if you accidentally put yourself into a higher or lower bracket.
It’s all too easy to overlook key deadlines for your taxes. Don’t. Here are some of the key ones you should look out for:
A lot of people are excited when they get a big tax refund. And that’s understandable. But you don’t want your refund to be too big, actually. If you regularly get large refunds, you’re having too much withheld from your paychecks. In effect, you’re giving an interest-free loan to the IRS. That’s money that you can’t use for your own goals or invest yourself. Changing the number of allowances you claim on W-4 form will increase your take-home pay. Your refund might be smaller, but you’ll be able to use those funds to meet other goals instead throughout the year.
Keep copies of all documents that you send to the IRS. Use certified mail for all important correspondence to the IRS. Don’t forget to keep your records in good shape so that you can find answers to any IRS questions about your return.
In most cases, you’re required to keep a record (physical, digital, or both) of your tax returns for the past seven years in case your records need to be consulted for an audit.
The tips we’ve just summarized are just a few quick things to check while you’re working on and submitting your tax return. Here are a few other strategies to keep in mind.
Itemizing deductions can significantly reduce your taxable income, leading to a lower tax bill. To maximize your deductions, keep accurate records of your expenses throughout the year, including receipts and bank statements. This will make it easier to claim deductions for mortgage interest, charitable donations, and medical expenses.
Consider hiring a tax professional to help you navigate complex tax laws and identify all eligible deductions. They can provide valuable insights and ensure you’re not missing out on any potential savings. Additionally, if you can, don’t forget to claim deductions for business expenses, such as home office costs and travel expenses.
If your total itemized deductions exceed the standard deduction for your filing status, itemizing is likely the better option. Using tax software can also help you identify eligible deductions and ensure you’re taking advantage of all the credits and deductions available to you.
Math and calculation errors are among the most common tax filing mistakes, but they can be easily avoided by using tax software. Tax software automatically calculates your tax liability and deductions, reducing the risk of errors. It also flags common mistakes and prompts you to correct them, ensuring your tax return is accurate and complete.
In addition to preventing errors, tax software provides guidance on tax laws and regulations, helping you stay compliant. Many tax software programs offer audit protection and support, giving you peace of mind during tax season.
By using tax software, you can also identify eligible credits and deductions, maximizing your tax savings. This tool ensures accuracy and completeness, making the process of filing taxes much smoother and less stressful.
Navigating your taxes can feel like an intimidating process, but it’s not insurmountable. By avoiding these common errors and getting help through an accountant or using a tax software, you can get your maximum refund and handle taxes as smoothly as possible.
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