Whether this is the first year you’ve filed your taxes, or you’ve been doing it for years, it’s always a good idea to review the most important rules before you get started. There are plenty of simple mistakes that even a veteran can make, but with a little research, they are certainly avoidable.
If you have serious questions, it is always a good idea to consult a tax lawyer. Tax attorneys have experience researching the tax laws, regulations, case law, and administrative guidance to help get a handle on complicated tax issues. However, in lieu of professional assistance, be sure to at least avoid these five common mistakes when filing tax returns:
- Missing the filing date. This one doesn’t even need to be said, right? Wrong. You might be surprised to know how many people let this important April date slide right by (NOTE: it’s April 17th this year, for “individuals,” March 15th for corporations, instead of April 15th). If you do not have all the information available to file, then you should request an extension to avoid the failure to file penalty. However, it’s important to remember: A TAX RETURN EXTENSION IS NOT AN EXTENSION TO PAY ONLY AN EXTENSION TO FILE. You must pay all tax due by the original, not extended, due date. Even if you cannot pay the tax due, you must file by the appropriate date, inclusive of extensions, to avoid late filing fees and penalties. If you are still uncertain about whether to file, then read our blog dated November 7, 2011, titled “I cannot pay the tax reported on my tax return. Should I file?”
- Failing to claim all your income. Your total income often includes more than your yearly salary. How about interest and dividends earned from CDs, savings accounts and investments? Did you include the money you made helping your buddy out with his new marketing business? And if you’re a parent and your child is under 18 years of age and earning dividend or interest income, then you may need to report that income on your tax return. Make sure you include everything, or you risk getting flagged by the IRS and owing more money down the line.
- Not itemizing deductions, or missing them altogether. This mistake is easy to make when filing tax returns – and it can end up being costly. Make sure you review the complete, IRS-approved list of deductions to make sure you know exactly what can be deducted. Just a few things to consider: medical and dental expenses, home mortgage points, business use of car / home, casualty and theft loss, and educational expenses.
- Incorrect basic information. Believe it or not, it happens all the time. You spend so much time and effort reading the rules and crunching the numbers that you make the mistake of entering incorrect personal information on your tax returns. Have another family member proofread for you, or step away for a few hours before checking it over yourself.
- Confusing federal and state laws. Don’t make the mistake of assuming that the same kinds of income are taxable for federal and state purposes. Likewise, don’t assume that similar expenses and deductions are allowable across the board. This is another reason you may wish to consult with a tax lawyer or CPA. Be sure to contact someone who knows not only federal law, but state laws as well.
With attention to detail and persistence, you can avoid these common mistakes when preparing and filing your 2011 tax return.
For more information, and tips on filing your taxes, contact Todd Unger today!