MONEY TALKS – Anyone who has poked their head outside the last two weeks couldn’t help but notice that winter is fading and spring is steadily approaching. While the melting snow and chirping birds may give some solace that the dark and cold days are behind us, it’s also a reminder that tax season is quickly approaching. Each year millions of Americans make simple mistakes hastily trying to get their tax returns filed before the deadline. Before you file this year’s return, be sure to check this list to make sure you are not making one of the seven deadly tax sins.
1. Missing the Deadline – If you procrastinate getting your tax documents together, there is a good chance you could miss the April 15th filing deadline. Missing the deadline itself is not a huge issue unless you fail to notify the IRS in advance. Be sure to file a Form 4868 extension request if you are going to be late filing your taxes, which will give you an automatic six-month extension to file your return. Keep in mind that the extension is only on the filing of the tax return, not the payment due. If you think you may have a balance due with your tax return, be sure to make an estimated payment with your 4868 to avoid any penalties and interest.
2. Filing the Wrong Tax Forms – Opting to use the Form 1040EZ because, as the name suggests, it’s easy to file could be a costly mistake. The 1040EZ forces you to take the standard deduction and does not allow you to itemize your deductions. Opting to file Form 1040 instead will afford you the option of choosing to itemize your deductions or take the standard deduction, whichever is higher. If you had significant medical or dental expenses, live in a state that taxes your income, paid real estate taxes or mortgage interest, donated to charity, or had a home office, then you should seriously consider filing a 1040 to maximize your deductions.
3. Spelling Your Name Wrong – Believe it or not one of the more common mistakes you can make on your tax return is to misspell your name. Whether it was a typo, you didn’t use your full legal name, or you recently married or divorced and haven’t registered a name change with the Social Security Administration, you need to make sure the name listed on your tax return matches your Social Security Card. Making a simple error could lead to a rejected return. Even if your return is accepted your refund could be delayed if the name on the check doesn’t match that on your bank account.
4. Wrong or Missing Social Security Number – Forgetting to include or entering the wrong Social Security number for you, your spouse, or your dependents is one of the most common errors you can make when filing your tax return. The IRS uses Social Security numbers to cross-reference information it receives from your employer and other financial institutions. If unable to do so, the IRS could reject your tax return. Avoid this simple mistake by verifying each Social Security number on your tax return matches the corresponding Social Security card(s).
5. Selecting the Wrong Filing Status – Filing under the wrong status is commonly made by single parents whom mistakenly file as Single instead of choosing Head of Household. If you have a qualifying dependent living with you and provided more than half the cost of maintaining the home then you may be eligible to file as Head of Household, which will give you an extra $3,000 in deductions. Another common mistake is for a recent widow or widower to file as Single. Widows or Widowers can file as Married Filing Jointly (MFJ) in the year of death. Furthermore, you may be able to file as a Qualifying Widow(er) for two more years if you have a dependent child in the house.
6. Forgetting to Sign and Date Your Return – Technically speaking an unsigned return is incomplete in the eyes of the IRS. This means that your return may not be accepted and could be considered late, leaving you liable for penalties and interest. Be sure to sign and date your return! Keep in mind that if you are MFJ, then your spouse has to sign as well. Remember, if you are electronically filing you are not exempt for this requirement. If you are e-filing you need to sign the return using an electronic Personal Identification Number (PIN).
7. Making Math Errors – The most common error year over year on tax returns is mathematical mistakes. In fact, every year the IRS catches millions of math errors as a result of poor arithmetic and/or inaccurate transposition. Using a tax software program will dramatically reduce the likelihood of a math error. That being said, tax software does not guarantee your return will be mistake free. It’s imperative that you double check the numbers you input because the software is not smart enough to know whether or not you are entering the correct figures. Filing an inaccurate return due to a math error could lead to big trouble with the IRS and less money in your pocket.