Nine Common Mistakes to Avoid When Filing Your Tax Return
Feb 11th 2011 1:00PM
Updated Feb 11th 2011 7:27PM
Yes, this seems like it would be a no-brainer. Yet, year after year, the IRS reports failing to sign your tax return as a top filing mistake. Also remember that a joint return requires two signatures -- both spouses must sign or the return will not be accepted.
2. Choosing the Wrong Filing Status
Filing status can be tricky to figure if you're getting married or divorced. Keep this rule 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 (single sex marriages excepted) as of Dec. 31, 2010, that will determine your filing status; it doesn't matter what else happened during the year. There are a few exceptions, and unlike on Facebook, you can't opt for "It's Complicated" on your tax return, so check with your tax professional if your status isn't clear.
3. Entering the Wrong Social Security Number
Entering the wrong Social Security number can happen to the best of us. Often, it's just a simple transposition error: You typed 45 when you meant to type 54. Double check the numbers to make sure they're correct -- and not just yours. Check the Social Security number (or tax ID number) of your spouse, your dependents, any household employees -- and your child-care provider, if you are claiming a child-care dependent credit. Entering a bad tax ID number or failing to enter one at all could bounce your return or cause you to lose certain credits and deductions.
4. Claiming Too Many Dependents
When children live apart from their parents for any reason, including divorce, separation or college, it can complicate matters when it comes to how many dependents to claim on your return. Custody agreements and other situations can complicate who claims a child as a dependent -- be sure that you understand the details of your own arrangements before tax time so you don't accidentally claim a dependent when you shouldn't. Additionally, sometimes parents and college students don't communicate their intentions when filing, which results in a child claiming independent status on his return when the parent also claimed him as a dependent. Be sure and sort out your dependents ahead of time; the IRS doesn't want to do this for you -- and it can delay your refund.
5. Not Waiting for Forms 1099 and W-2
Sometimes, in an effort to get a refund back quickly, you might be tempted to rush preparing your return. Don't do it. Wait for all of your tax forms so you don't leave anything out. You'll need those forms so you can make sure you enter the information exactly as it appears; if you're planning to prepare your return from a last pay stub or other document, it may not have all of the information you'll need, such as total withholding, deductions for health insurance and other perks, and deferrals. If you haven't received all your forms by now, you may need to contact the IRS.
6. Not Deducting the Economic Recovery Payment
In 2010, taxpayers were still eligible for the Making Work Pay Credit. Some taxpayers, such as seniors and/or the disabled, were also eligible for an Economic Recovery Payment (ERP) of up to $250. However, you can't claim both. Last year, the IRS found that a number of taxpayers were not deducting the $250 ERP from their Making Work Pay Credit amount on Schedule M. If you received a check, be sure and note it on your return; it's not taxable to you but it will affect how much credit you're eligible to receive.
7. Estimating Your Deductions
If you itemize, those deductions aren't meant to be guesses; they should be an accurate reflection of your expenses. Expenses should be documented, whether for charitable, business or medical purposes. While it's true that some expenses are routinely round numbers that don't vary (rent, for example), you may raise eyebrows by reporting an even $10,000 in medical expenses or $5,000 in utilities. Report the actual amounts expended and keep accurate records to support your claims.
8. Bad Math
As more and more taxpayers move to e-file, the chances of math errors shrink -- but there's still a possibility that you made an error. In fact, the IRS still cites bad math as a common error. Go over your figures one last time to be sure that they're correct. If you're doing your return by hand or using a fill-in form, use a calculator.
9. Confusing Federal and State Tax Matters
It can be hard enough sorting out all the rules for federal income tax, but to complicate matters, the rules for your individual state may be very different. Don't assume that the same kinds of income are taxable for federal and state purposes (this is especially true for deferred compensation and retirement income). Similarly, don't assume that the same kinds of expenses and deductions are allowable. Pay attention to your tax forms, such as your forms W-2, and enter the information exactly as stated. Make sure that your tax professional understands the rules in your state (or states, if you live and work in different states). Or if you're using tax software, make sure it includes a state module.
Don't make tax season more stressful than it already is -- when you're finished with your taxes, give them one more look to confirm you haven't made any obvious mistakes. Once you're satisfied that you've prepared a complete and accurate return, go ahead and file. Then take a deep breath. You're done -- well, until next year.