Here we are at the tax deadline. Some last-minute tips to remember; people make the same mistakes every year, so we keep repeating them:
- Miscalculating the basis of investments. Using the wrong basis can cause more taxes to be paid than should be. (Basis is what you paid for it, plus any dividends or capital gains that have been reinvested.)
- Overlooking dependency tax deduction or credit breaks. Often, taxpayers don’t realize that taking care of a relative may offer a tax deduction. (More than 50% of care and support for family member or individual who lives with you, goes to college or lives in a nursing home.)
- Failing to apply carryover items from previous years. Losses not able to be used in one year are allowed to be carried over for many years. (Capital losses, net operating losses, and charitable contributions are some examples.
- File an amended return when you realize you made a mistake. If you do not file amended returns, you could lose tax benefits and/or possible refunds. (Will not invite an audit and you have three years to file an amended return.)
- Choosing the wrong filing status. (Married, Single, or Head of Household status on December 31st is correct status to claim). No matter what your filing status is during the year or part of the year, whatever your status is as of DECEMBER 31, each year IS the filing status for the whole year. There are some exceptions to this, so be sure to ask your accountant.
- Claiming ineligible dependents. (Cannot claim dependent if already claimed on another person’s return)
- Failing to file a tax return when a refund is due. Some people think they can delay filing tax returns because they believe they are entitled to a refund. (Refunds are forfeited three years after the due date)
- Correctly add your taxes owed. (A computer will guarantee this, but if doing your taxes by hand, mistakes can be made)
- Sign and date the tax returns. (If you don’t sign and date your returns and send them in, you can be fined up to $500 for a frivolous tax return penalty)
- Send your return to the right address. (If you have a refund, your return goes to a different address than if you owe taxes. Don’t confuse the address or it could delay your refund or the filing of your tax returns)
- Be sure the social security numbers and names agree. Be sure to write your FULL Social Security Number (SSN) on the returns (Often taxpayers leave out a number or use a wrong SSN, and often taxpayers misspell names on tax returns. (This year you will find that tax deductions have been disallowed if the social security numbers and names do not agree. If you have been married or divorced, be sure that your name has been changed with the Social Security Administration to ensure accurate tax return filing.)
- Wrong bank account numbers. You should choose to get your refund by direct deposit. But it’s important that you use the right bank and account numbers on your return. The fastest and safest way to get a tax refund is to combine e-file with direct deposit.
- Electronic filing PIN errors. When you e-file, you sign your return electronically with a Personal Identification Number. If you know last year’s e-file PIN, you can use that. If not, you’ll need to request your prior year’s PIN from the IRS. Do this on www.IRS.gov and be sure to enter your Adjusted Gross Income (AGI) from your prior year’s return, in order to have the IRS give you last year’s PIN.
- Consider filing an extension of time to file your tax return, with a Form 4868 (Filing an extension can make a big difference if you owe taxes). If you do not owe taxes, then an extension is not necessary. But if you do owe taxes, and you don’t file an extension, the taxes owed could have a five percent (5%) penalty added onto the tax return. Taxes owed with an extension only have a one-half of one percent (1/2 of 1%) penalty attached to the taxes.
Call today, don’t delay! See how this affects you. We can be reached at 602-264-9331 and on all social media under azmoneyguy.