Here we are at the April tax deadline. But if you have started preparing early like Dave and Julia, then you have enough time left to cross check what you did. This will ensure reduction or elimination of any mistakes in the process. People often make the same mistakes every year, so here are a few last-minute tips to remember:
1. 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 assets or investments, plus any dividends or capital gains that have been reinvested.)
2. Failing to deduct health insurance (includes Medicare)
Business owners, partners and shareholders in S-Corporations can deduct health insurance or Medicare premiums without itemizing deductions. So, if you take the Standard deduction, you can still deduct health insurance on your tax return.
3. 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.)
4. Failing to apply carryover items from previous years
Losses not able to be used in one year can be carried over for many years. (Capital losses, net operating losses, and charitable contributions are some examples.)
5. 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 (3) years from the date you filed the original returns to file an amended return.)
6. 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 tax professional.
7. Claiming ineligible dependents
Cannot claim dependent if already claimed on another person’s return.
8. 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 original due date of a tax return.
9. Correctly add your taxes owed
A computer will guarantee this, but if doing your taxes by hand, mistakes can be and are often made.
10. Sign and date the tax returns
If you don’t sign and date your returns and send them in, you can be fined or penalized for a frivolous tax return penalty.
11. 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 to where you send your returns, or it could delay your refund or the filing of your tax returns.
12. Be sure the social security numbers and names agree
Be sure to write your Social Security Number (SSN) on the returns. Often taxpayers leave out a number or use a wrong SSN, and sometimes mis-spell names on tax returns. This year you may 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.
13. Wrong bank account numbers
You should choose to get your refund by direct deposit. The fastest and safest way to get a tax refund is to combine e-file with direct deposit. But it’s important that you use the right bank and account numbers on your return. Always be sure to check before you send in the returns for accuracy.
14. 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.
15. 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. That’s only 10% of the usual penalty, just by filing an extension!
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.
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