Thankfully, I am done with this chore for the year – but I know a lot of you might not be, so when I was given this list of tax-time-tips, I had to pass it on. And remember, you have a couple of extra days this year – taxes aren’t due until April 18, instead of the usual 15th. (Some people see this as a “gift” from the IRS. I see it as just dragging out the agony!!)
Top 5 Tax Time Mistakes
It’s here again. Tax time. Comes around pretty fast, don’t you think? If tax time left you scrambling last year, come prepared this time around. Know the top five mistakes tax filers make and avoid them.
Mistake #1: Filing a Paper Return
Forget the pencil and paper. File online. Anthony Burke, a spokesperson at the IRS, says that not e-filing is the biggest mistake that taxpayers make. When you e-file, you can get your refund in half the time it takes a paper return. And you are less likely to make mistakes.
Last year, Burke said that of the 20 million paper returns the IRS had received, about a million had mistakes. Meanwhile, of the 44 million returns received electronically by that day, only about 30,000 had errors. That’s doesn’t sound great, but it sure does cut your risk that you will be among those with an error.
All taxpayers can e-file their taxes for free. Check out the IRS’s Free File program at www.IRS.gov/efile. You can also go to that Web site for a list of Web sites, software and tax professionals that offer e-file.
Mistake #2: Being careless
Among the most common mistakes that people make on their returns is filling in the wrong social security number and not signing the return. Other mistakes include incorrectly calculating the earned income tax credit, capital gains or losses or the taxable portion of social security benefits.
All of these are either an input error or a calculation mistake. Both of which, Burke says can be prevented by e-filing. If you enter the wrong social security number, the system rejects the filing. And since e-filing automatically crunches the numbers for you, your calculations will be on target.
These types of careless mistakes will definitely slow your refund.
Mistake #3: Underpaying
If you’re going to make a mistake, make it by overpaying what you owe the government. If you under estimate or miscalculate what you owe, the IRS will bill you for that amount plus a minimal penalty of 0.5 percent per month, plus interest. If you substantially understate your income tax, you could pay up to a 20 percent penalty.
If you find that you shorted Uncle Sam, don’t wait for the bill — file an amended return. Check out Form 1040-X on the IRS Web site.
Mistake #4: Skipping direct deposit
If you take the direct deposition option, you are likely to get your refund a full week earlier than if you have a check mailed to you, even if you file an electronic return.
Mistake #5: Fudging the truth
File an honest return. The IRS has an uncanny sense about these things and they are reluctant to say what on a return can trigger an audit. Suffice it to say, that if you’re honest about your facts and figures, you have nothing to fear from an audit. In fact, it can be a good thing.
Many times the IRS discovers deductions that were missed, resulting in an even bigger refund.