Taxes are one of those things in life where the devil is in the details. Bumble, fumble, and blow it in other areas of your life, but try to get this one right the first time.
Messing up is part of being human – we all make mistakes. That being said, there are areas where it pays, both literally and figuratively, to keep them to a minimum. Prime example? Taxes.
Every year the IRS sends thousands of notices to taxpayers nationwide because of easily preventable errors. In these days of computer-generated returns and electronic filing, the type of mistakes may have changed: Math errors, for example, are certainly less frequent now. But there are still common mistakes that a computer can’t see, so you need to be vigilant. And you have powerful motivation to do so, because an error on your return can at best delay your refund and at worst result in an audit that leads to interest, penalties, and major stress.
Take a look at this short news story, then meet me on the other side for more.
Here’s another look at that list, along with some additions…
- Wrong Social Security numbers: Wrong number, no number, and misplaced digits could really ruin everything.
- Not checking your math: Despite the use of computers, math can still be a source for errors. Especially if you’re adding numbers on the side and inputting only the total on the return.
- Not reporting all your income: If one of your 1099s got lost in the mail, you may forget to report some interest income. Look at last year’s return, and think carefully: are you sure there’s nothing else? Not reporting income is the shortest path to audit-land.
- Overlooking deductions: Good software or a decent accountant should keep you from forgetting valuable deductions, but it doesn’t hurt to read a little to make sure. Check out 13 Tax Changes for 2010 That Could Make You Money.
- Not signing your return: If you’re filing electronically, you’ll be signing your return electronically too. But if you’re not filing electronically, make sure you sign that return.
- Not signing your check: If you’re paying by check, make sure you sign that, too. It should be made out to “United States Treasury” and include your name, address, social security number, daytime telephone number, tax form, and tax year on it.
- Not attaching you W-2 or other forms: If you’re mailing your return, you need to send copy B of your W-2, 1099-Rs, and certain other forms.
- Using the wrong form: Using a simple form like an EZ, when a 1040A or 1040 would get you a bigger refund could cost you money. Again, some software will ask you questions to avoid this one.
- Paying to have your taxes done by a pro, or even unnecessarily paying for software. Millions of Americans are eligible for free help. Here’s a story I did on how you can find out if you’re one of them: 3 Tips for Free Tax Help.
- Failing to file electronically and/or use direct deposit is a mistake, at least if getting your refund back quickly is important to you. Combining electronic filing with direct deposit will convert what could take weeks into days.
- Paying for a tax pro vs. doing it yourself with simple software: If you need a pro, by all means, use one. But if you don’t, don’t waste your money. Check out this recent story: 9 Tips to Find a Tax Pro: But Do You Really Need One?
- Going too fast because you’re on deadline: The quickest path a bad job is trying to do a rush job. You’ll potentially miss deductions and make other mistakes that could result in a smaller refund or bigger problems. Start early and take your time.
- Taxing your budget with extra unnecessary fees: Refund anticipation loans and refund anticipation checks are almost never necessary. See Beware These 3 Stupid Tax Tricks.
Bottom line? Taxes are one of those things in life where the devil is in the details. Sometimes something seemingly simple can literally be worth thousands of dollars. So bumble, fumble, and blow it in other areas of your life, but try to get this one right the first time.