5 Tips For Avoiding The Most Frequent Tax Pitfalls
Midway through Tax Season 2014, many Americans have yet to complete their yearly filings. With approximately 100 million tax filers, the IRS reports that 20 to 25 percent of these individuals will wait until the first two weeks of April to prepare their returns.
As the April 15 deadline steadily approaches, those who have waited to file may face the stressful season and act rashly, rushing through the forms and procedures without proper consideration. According to the IRS and Turbo Tax, the most common mistakes made on tax filings are completely avoidable: math errors, illegible social security numbers and unsigned/dated forms.
Regardless of when you prepare taxes, there are common potential pitfalls anyone can trip into.
General Filer Mistakes
Do The Math: According to Bankrate, math miscalculations top annual tax blunders. “The most common error on tax returns, year after year, is bad math.” This flub is closely followed by computation errors, specifically.
In order to avoid these errors, use a calculator or Excel spreadsheet to check and double check all sums. Pay special attention when computing credits and deductions, as the regulations for these calculations are not always straightforward. Even when using an automated, electronic tax filing program, math errors are possible. Check and double check digit order, placement and initial accuracy before relying upon a computer system to correctly calculate your tax information.
Other boxes that frequently receive errors include: withholdings, estimated tax payments, taxable amounts for Social Security, earned income credit and disability deductions.
Cross Your Eyes And Dot Your Teas?: While spelling your own name, your spouse’s name or your dependents’ names may sound too ridiculous to be true, spelling errors are among the top mistakes reported yearly.
In particular, be wary of misspellings, legibility and name changes that may have occurred over the course of the last fiscal year. Newlyweds or recent divorcés often fall victim to these types of mistakes, using names that do not match the government’s official record. Additionally, be aware of hyphenations and common nicknames. Make sure to use legal names exactly as they appear on current Social Security cards.
Watch Those Numbers: While not a math error per se, miswritten numbers are always cause for concern. Make sure that when reporting Social Security numbers that the digits appear identical to how they appear on your card. Also, when imputing account and routing numbers for direct deposits, make sure the numbers are in the right order and the appropriate series are attributed to the appropriate moniker.
Communicate: Make sure all members of your family are on the same page regarding filing status. Common errors occur when:
- One partner tries to file “married, filing separate” and the other tries to file “married, jointly” or “single,” due to misunderstanding.
- Head of household is marked for multiple members, or not marked at all. Head of household can also lead to confusion, particularly in domestic partnership filing situations.
- Head of household is marked instead of “single.”
- Multiple people claim the same dependents. Be wary of blended family tax pitfalls, including duplicate claiming of dependents.
- Non-minor children file their own taxes, unaware that their parents still claim them as dependents, and thus file as non-dependents.
Avoid these time-consuming errors by having an open discussion with all relevant members of the family, ensuring that everyone agrees on filing statuses.
Down To The Dirty Details: After every box has been calculated and recalculated to ensure accuracy, make sure to sign and date all relevant forms. Without endorsing tax filings, they remain paltry documents.
Another small detail that can delay or otherwise deter efficient tax returns is missing the deadline entirely. All mailed in tax forms must be postmarked (officially stamped from the Post Office) no later than April 15. All electronically submitted tax forms must be submitted on or before 11:59 p.m. on April 15.
If you fear a missed deadline, extensions can be granted, but these requests must also be made no later than April 15.
This article is part of a collaborative project between NASDAQ contributor and Benzinga Managing Editor Joe Young and Benzinga Personal Finance Writer Rebecca Sheppard.
Plus:
Be Your Own Driving Force: Trading In An IRA