With the tax-filing deadline on Monday, April 18, plenty of
taxpayers will be spending their weekend filling out forms. If
you're one of them, you want to make sure that you don't make
costly mistakes or overlook money-saving deductions in your rush to
complete your tax return. Here are nine pitfalls to avoid.
Being unwilling to admit you need more time.
If you discover over the weekend that your tax situation is just
too complicated to sort out in a few hours, file for an extension
with the IRS to delay the due date for your return until October
17, 2011. You'll still have to mail a check to the IRS by April 18
if you owe (you can estimate the amount). See
How to File an Extension
to learn more.
Overlooking the Making Work Pay credit.
You've probably been enjoying the fruits of this credit via reduced
payroll tax withholding throughout the year. But to lock in your
savings -- by reducing your tax bill by $400 if you're single or
$800 if you're married and file a joint return -- you'll need to
actually claim the credit on your 2010 tax return -- and you'll use
Schedule M to do so.
The credit is equal to 6.2% of your earned income, capped at
$400 or $800. For single filers, it starts phasing out at $75,000
of adjusted gross income and dries up at $95,000. The phase-out
zone for couples is $150,000 to $190,000. This is one of
the most-overlooked tax deductions
we've identified.
Getting caught in the weeds.
Too many people get in a frazzle because they're looking for every
last little receipt that could save them $2. Make sure that before
you go into a paperwork tailspin that it's worth it for you to
itemize. The standard deduction is $11,600 for married couples
filing a joint return, $5,800 for singles and married individuals
filing separately, and $8,500 for heads of household. Nearly two
out of three taxpayers take the standard deduction, rather than
itemizing deductions, such as mortgage interest, charitable
contributions and state and local taxes. Do note that wealthier
filers win big this year: The tax agreement passed in late 2010
means their itemized deductions aren't cut back anymore.
Remember that medical expenses have a separate threshold: You
can write off only those out-of-pocket medical and dental expenses
that exceed 7.5% of your adjusted gross income. If your adjusted
gross income is $50,000, for example, and you have $4,000 in
unreimbursed health-care costs, you would be able to claim a skimpy
$250 as an itemized deduction on Schedule A. So, do some
ballparking of your expenses before you go on a document hunt. Read
more about
The Challenge of Deducting Medical Expenses
.
Paying Uncle Sam rather than yourself.
If you owe the IRS, you may be able to lower your tax bill by
contributing to an IRA. You have until April 18 to make a
contribution for 2010. You can deduct your contribution if you're
not covered by a retirement plan at work. Depending on your income,
you may be able to claim a deduction even if you or your spouse
are
covered by another retirement plan at work. See
Fund an IRA, Cut Your Taxes
.
Mixing up a Social Security number.
Year after year, the IRS says bad Social Security numbers are at
the top of the list of taxpayer mistakes. Pull out your Social
Security card -- as well as the cards of your spouse and dependents
-- and check the numbers against what is on your tax form.
Forgetting to enter a number, or transposing two figures, will slow
down your refund (if you're getting one) or lead the IRS to reject
your exemptions for dependents if you get their numbers wrong.
Getting bank routing and account numbers wrong.
If you are getting a refund and are electing to have it deposited
automatically into your account, make sure you enter your
information correctly so the money actually shows up in your
account.
Leaving off a signature.
The IRS says this is one of the most common mistakes, and it won't
process a return without a signature. Everything will be put on
hold while the IRS sends you a special form to sign certifying that
your return is accurate.
Forgetting to attach forms.
If you file a paper return, make sure you attach your W-2 and other
forms that reflect tax withheld to the front of your return. If
you're claiming credits that require special documentation, such as
the homebuyers credit, include those records with your return.
Making math mistakes.
use tax software and file your return
electronically
www.irs.gov/freefile
Not enough postage
On April 17, the rate for extra postage is going up. The price of a
first-class stamp stays the same, but if you've got a fat return
that weighs more than an ounce, make sure you put enough on the
envelope. New rates are available at
this USPS link
. You'd hate to have all that hard work come back to you with an
uncashed check that means penalties and interest are accruing.
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