Stupid tax return errors can result in anything from an audit, to (in most cases) just a simple request from the IRS to make corrections to your return.
However, many errors result in a penalty, or simply you losing out on a tax break, or just wasting hours filling out forms you don't really need to file.
Obviously, a good way to avoid these errors is to file online, which is an almost fool-proof way of making sure that you haven't made any dunder-headed-mistakes, and not lose out on any money owed to you, or worse, have to pay penalties.
Listed below are a few of the most common tax errors, with brief explanations on how to avoid them. Now you'll have no excuse for making these errors!
If you want to avoid costly mistakes, while at the same time taking advantage of all credits and deductions, you'll want to do your taxes with TurboTax this year.
TurboTax helps you work quickly and easily, and it double-checks your return to help you get the largest possible refund. You can even file your state taxes and get your state refund (which may be substantial) much faster than if you mail a paper return.
Source: Internal Revenue Service
We gathered some of the more common errors here, and make some suggestions as to how best to avoid them.
Not all of the following tax mistakes will lead to an IRS audit, (some of them simply keep you from saving money). Nonetheless, you should still be aware of these errors, and if at all possible, avoid making them by e-filing.
Not choosing the filing status that is most beneficial to you. Often you won't have a choice, but certain filing statuses are much less desirable when it comes to taxes. For instance, the married filing separately filing status makes you ineligible for most tax breaks. (NOTE: the IRS is cracking down on those filing under the wrong status illegally to get the benefits of that status.)
Not getting a social security number for a new baby. Without a social security number the IRS may not count your newborn as a dependent and you may lose out on a tax break.
Not having receipts for expenses, donations, or sales. You should have receipts for anything you claim, even charitable donations. If the IRS audits you and asks for receipts as proof, you could be fined if you can't supply them.
Don't forget about your charitable contributions. Although you may not think the clothes you give to charity are worth much they can add up.
Consider using valuation software to see how much items sell for when determining what to claim. You may be pleasantly surprised. TurboTax Online includes this function for free in many of its versions
Self employed individuals or taxpayers who have significant investment income should make quarterly estimated tax payments. If you wait to pay your taxes when you file your income tax return, you'll pay underpayment penalties to the tune of about 5 percent per annum for each quarter that the taxes aren't paid.
Don't make this costly mistake.
Forgetting to claim the mortgage points paid by the seller. This is a completely legal tax maneuver taxpayers often overlook. You can claim the points paid by the seller as long as you also reduce the tax basis of your new home by the amount of seller-paid points you are deducting. This is strictly beneficial to you, so you'll not be fined or audited if you fail to take advantage of it.
If you sell your house and the part of your home that is used for business does NOT qualify for the maximum $250,000 exclusion of gain from tax on the sale of your home or $500,000 if Married Filing Joint; you could end up paying taxes on the home office portion of the gain.
When you change jobs, be sure to adjust your state income tax withholding allowances once you've changed your federal numbers. Sometimes your federal withholding may be accurate even after a job change, but forgetting to adjust your state withholding as well may set you up for an unpleasant surprise. To avoid penalties, update your Form W-4.
If you're otherwise protected from the application of underpayment penalties there's really no reason to pay your federal taxes early.
Let that money earn interest for you until it's time to pay Uncle Sam.
Although these are all very simple tax errors - the first thing you should realize about filing your return is that every little mistake affects the entire return.
When you prepare your tax return each year, check all the information you submit. This means paying close attention to every detail, down to verifying that the social security number on your the front page (or the screen) is actually yours.
After all, as the table at the top of the page shows, the IRS says that 1.16 million returns come in with incorrect SSNs! So as you can see, anyone can have a brain-fart.
By far the easiest way to insure that no silly mistakes are made is to prepare and file your return online.
TurboTax Online is designed to triple-check all calculations, the filing process, and any and all credits and deductions claimed, to make absolutely certain that you are not making costly mistakes that can result in penalties, and that you don't miss out on any possible tax savings.
And, best of all, TurboTax is free to use until you file. So why not give it a try?