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Your tax return: What could go wrong?
Every year taxpayers make mistakes on their tax returns that range from silly to serious. What kinds of errors should you keep in mind as you get ready to file this year’s return? The Minnesota Society of CPAs highlights three common missteps to avoid.
Don’t get the details wrong.
Incorrect Social Security numbers and even taxpayer names are among the most common errors on tax returns, according to the Internal Revenue Service. Other problems include simple math miscalculations and errors on bank routing or account numbers when people use direct deposit for their returns. Confusion about filing status is another common problem. There are five different choices — single; married filing jointly; married filing separately; head of household; or qualifying widow(er) with dependent child — so make sure you know which one applies to your situation.
Finally, did you sign and date your return? Failure to do so is another error frequently seen at the IRS. Remember that if you’re filing jointly, both spouses must sign the return. When it comes to your return, it’s best to take your time, read the instructions carefully and check your calculations when you’re done. Errors could delay processing, which means it will take longer to get your refund, if you’re expecting one.
Don’t miss out on credits or deductions.
It can be tough to figure out how to apply a credit or deduction, but if you fail to take one that you deserve you miss out on the chance to lower your tax bill. Some commonly overlooked deductions that you may qualify for include those for state sales tax, charitable contributions, student loan interest payments made by the student’s parents, the expenses related to finding a job or moving to take your first job, and military reserve members’ travel expenses, but there are many more that taxpayers often miss. Did you know, for example, that you may be able to claim your parents as dependents if you provide more than half of their support? Or that you might be eligible for a refund for overpaid Social Security taxes if you work for more than one employer? If you’re a small business owner, do you qualify for the home office deduction or other business credits or deductions? Your CPA can help identify all the opportunities for minimizing your tax bill.
Don’t ignore what your return tells you.
Tax returns are also a great source of information, serving as your own personal income statement. You can learn a lot from the facts and figures they contain, but many people fail to do so. For one thing, your return may be telling you that you that you’re paying too much in taxes. In addition to forgoing the credits or deductions you’re eligible for, you may be missing out on ways to lower your taxable income.
If you have a high level of taxable dividend income, it may be time to consider some tax-deferred investments. One way you can do that is by contributing as much as allowed to a tax-advantaged retirement account. In addition, if your employer matches your contributions to a 401(k), you’re leaving money on the table if you don’t deposit enough each year to qualify for the full match. Your CPA can review your return with you and help you understand what the numbers mean.
Your local CPA can help.
CPAs offer not only tax return preparation, but also expert planning advice that can help you minimize your taxes. And remember: Even the tax return preparation fee you pay may be deductible. Be sure to contact your CPA with all your financial questions. Don’t have a CPA? Visit www.mncpa.org/referral to find a CPA in your area.