5 Terrible Tax Mistakes to Avoid
It’s that time of year again.
This could be an exciting time for most. That is, unless you owe the government money. It is important to review your entire return because any error may delay the filing process. If you have specific questions and want to know detailed requirements for filing in your state, go to irs.gov and click on your state for information, forms and online tax tables. No matter what, avoid these five common tax filing errors:
1. Forget to double check your return before you submit it to the IRS.
Entering the incorrect information such as your social security number, date of birth, dependent information, or an incorrect address will put a delay on your return from the date it was filed. If you are due a refund and requested direct deposit, make sure you check your financial institution’s routing and account numbers carefully.
2. Use your last check stub for total income.
The Chicago Tax House Professionals states “sometimes the last check stub doesn’t show the true amount that was made for the year.” Waiting to receive your W2 may be the best way to identify the “true” amount of dollars you made for the entire year. Additionally, the EIN (Employer Identification Number) is on the W2 (and not on the last check stub) that is needed to file your taxes correctly.
3. Make a mistake on the “dependent” designation.
If your children lived apart from either parent for any reason, including divorce, separation or college, it can complicate things when determining how many or which children to file. Custody agreements and other situations can complicate who claims a child as a dependent — so don’t accidentally claim a dependent when you shouldn’t. Also, if you are the parent of a college student, make sure to communicate and determine if the parent or the student is filing for the student. This may seem like a “no brainer,” but just an FYI…file your own dependents and avoid fines and penalties (up to $5,000) and the status of being “disallowed” the right to file an EITC (Earned Income Tax Credit) for up to 10 years.
4. Fudge filing status.
Filing status is another common mistake made when filing income taxes. Keep this in mind: Your filing status is determined as of the last day of the tax year. So, if you’re legally married or divorced according to state law as of Dec. 31, 2013, that will determine your filing status; it doesn’t matter when or if the status changed throughout the year, the last day of the year is what matters.
Avoid computation errors in figuring the taxable income, withholding and estimated tax payments, earned income credit, standard deduction for age 65 or over or blind, the taxable amount of social security benefits, and child and dependent care credit. Also, missing or incorrect identification numbers for child care providers can cause a headache.
About Dr. Karen Ratliff
Dr. Ratliff is a certified life coach and professional educator, assisting many people in accomplishing financial, career, and educational goals. She is also the author of “Tightening Your Bootstraps: 104 Tips to Kick Your Debt to the Curb Now.” Keep up with her budgetary advice via Twitter @drkarenratliff and her website at www.drkarenratliff.com