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| Stupidest Tax Mistakes To Avoid This Time Around |
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As the season to fill tax returns and forms approaches people get confused and
nervy. The IRS dons the role of a huge brooding monster that is all set to
devour you. Unfortunately most of us keep postponing filing of papers and
putting our affairs in order until the very last minute and then confusion and
stress reign supreme.
The last minute dash and the lack of knowledge of
tax laws, depreciation formulas, and deductibility guidelines can land you in a
soup. And, this means coughing up precious dollars that you could find better
use for.
Errors however small can result in payment of higher taxes and
can mean a delayed or no refunds. As in everything, the way to smoothen things
is to be systematic and file papers pertaining to tax returns carefully
throughout the year. Do not throw away bills, vouchers, or receipts that support
your tax forms. Next discipline your self to read the IRS rules and regulations.
Do not depend on what others tell you or hearsay. Check out facts for yourself.
Everyone makes "tax" return mistakes even professors, CEOs, and VPs.
Some common mistakes which are just plain idiocy or stupid are:
1.
Benefits claimed pertaining to dependent children. Often if you fail to know the
allowed exemptions you may fail to make a correct claim or make an incorrect
one. To help clear confusion in 2006 the IRS created a uniform definition of a
child and the broad outlines are at:
http://www.bankrate.com/brm/itax/tips/20010208a.asp . However if you have any
doubts or questions clear them before filing your return.
2. Most errors
are calculation mistakes and wrongly filled in figures. Always check and recheck
where the full stop or comma is applied. Go through the numbers patiently and do
your totaling on two separate days. Better still ask a family member or friend
to check the figures for you. Consider using "tax software programs" these ease
many problems in filing your return. When filling details keep in mind the fact
that the IRS will check entries against W-2, 1099 and other statements that
pertain to your tax. If a discrepancy is found it just means trouble as well as
delays.
3. Forgetting to sign and date the forms is a mistake that leads
to the IRS just not processing your return. Be sure to check all the pages
carefully and ensure you have not missed anything however small and
insignificant. Another common error is forgetting to write your social security
numbers or tax ID numbers.
4. Often tax payers forget to submit all
relevant forms like W-2, 1040, or 07, or 16. Check the relevant schedule for
each claim and ensure that all relevant and supporting forms are attached to the
return.
5. Failing to keep track of investments, allowed deductions,
interests paid or earned and so on. You need to maintain details of when you
invested, what dividends were paid, whether any taxes were deducted on maturity,
any capital gains, taxes paid on sums earlier. If you clearly keep track of
taxes paid you could avoid paying tax on amounts already taxed. The calculations
must be done carefully and systematically to avoid faux pas.
6. Choosing
the EZ form 1040Ez rather than the long form. If your earnings, expenditure and
other things are simple then just take the trouble of filling the longer form.
You will be surprised at the amount you can save in taxes. The longer form
allows subtractions from taxable income like student loan interest, alimony
paid, donations of charities and so on.
7. Missing the deadline and
asking for an extension. This means paying late penalties as well as interest.
In case a personal problem prevents filing in April you need to submit form 4868
by the April deadline to get an extension.
8. Using a wrong table to
make calculations. Two things need care filing status and the right tax tables.
Using wrong ones or filing under a wrong status will put you in more trouble
than you need. And, the mistake could mean paying taxes on taxes or on
investment earnings. Be astute and compute your tax using the work sheet at the
back of the booklet.
9. Three laughable mistakes tax payers make is to
fill out the check wrong and forgetting to sign it. Posting the forms without
the proper postage on the return package. And, worst of all not using the
pre-printed label and envelope provided by the IRS.
The IRS has
modernized its systems and some of the silly mistakes can be avoided if you opt
for electronic filing. Last year almost over 50% of the taxes were filed using
e-filing. The advantages are many. All the forms you will need are on tab, the
software takes you step by step through the filling process, the electronic
calculators rarely make errors, and most of all e-filing forms get processes
quicker the turnaround is 14 days. See: http://www.irs.com/. If in doubt, you
can e-file using the services of an authorized tax professional.
File on
time and correctly. Avoid heart burn and hypertension.
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