Tax Tips

 

Afraid of getting scammed this tax season? Need tips to make sure your taxes are prepared correctly? Interested on the latest suggestions on tax savings? Then read on.

 

 

   

Claiming Charitable Deductions

Get Those Receipts

Charitable deductions. You'll need a bank record, such as a cancelled check or a receipt, even for the smallest donation. That means that if you gave $1 in cash to the Salvation Army bell ringer over the Christmas holidays, you can't claim a deduction without a receipt. For donations of motor vehicles, get a completed Form 1098-C or similar statement from the organization and attach it to your return.

 

Common Tax Errors

Forgetting to sign return

Especially if you use tax software, it's easy to forget that you need to sign and date your return. If you're married filing jointly, don't forget that your spouse also needs to sign and date the return. If you opt to e-File, you can eliminate the possibility of committing this error.

Forget your W-2?

Forgetting to attach Copy B of your W-2 form to your tax return. Your W-2 form (or forms, if you have more than one job) is what your employer hands you or sends you in the mail stating your annual wages and tax withholding. Taxpayers filing paper returns should not forget to attach this form according to IRS instructions.

Know your Social Security Number

Entering your Social Security number incorrectly (or not at all). If you don't have your number memorized, it's best to look at your actual Social Security card when entering your number. No matter what, double and triple check what you enter before submitting your return.

Addition errors

Making mathematical errors. Avoid errors in math by using tax software to complete your return. If you are determined to complete your return by hand, at least use a calculator or spreadsheet program to perform your calculations.

Keep those Copies

Not making a copy of your signed and dated return. You should always keep copies of your tax returns for your records. Your previous year's return can help you file next year's return, will be indispensable if you get audited, and will be required if you apply for a mortgage or refinance.

Time is of the Essence

Waiting until the last minute. As in all other areas of life, you are more likely to make a mistake if you put off preparing your tax return until you are under the gun. You are also less likely to have time to double check your return for any possible errors. Similarly, you should prepare your return when you're alert and well-rested - you'll complete it faster and more accurately.

Don't forget that Income

Not reporting all of your income. Almost all income is taxable - even if your employer or financial institution did not send you a tax form reporting that income. If you're not sure if money you earned or received is taxable, consult IRS Publication 525, Taxable and Nontaxable Income.

Are those deductions real?

Taking deductions you aren't entitled to. A common mistake, intentional or not, is for small business owners to claim deductions for business expenses that the IRS does not allow. If you're not sure if an expense is tax deductible, read IRS Publication 535, Business Expenses, or consult a tax professional.

Don't forget those deductions

Not taking all the exemptions and deductions you are entitled to. It is perfectly legal to reduce your tax bill as much as possible by taking advantage of all the exemptions and deductions that apply to your situation. This is called tax avoidance, and it should not be confused with tax evasion, which is the illegal nonpayment of tax that you really do owe. Don't forget commonly overlooked deductions such as certain fees you may have paid if you sold your home, the fee you paid to license your vehicle and any non-cash contributions you made to a charity. Make sure to keep documentation in your personal tax file in case you need to prove that you are entitled to these write-offs.

Maybe it's best if you let a professional prepare it (such as Maxwell Shmerler & Co.)

Preparing your return yourself when it would be more efficient to hire a professional. This mistake is common among small business owners, whose time is generally best spent pursuing profits rather than completing paperwork. Even if you normally handle all aspects of your business yourself, it may be worth it to hire a tax professional. Taxes for small business owners can be very time consuming and time spent preparing taxes is time that could be spent earning more money. Of course, you will have to spend time gathering the documents and records related to your return no matter who prepares it, and in some cases, especially if you are adept at preparing tax returns, you may get more bang for your buck by saving the money you would have paid a preparer and doing the work yourself.

Don't forget to mail your payment and estimates

Forgetting to mail your payment. If you owe the IRS money, don't forget to send your check. On the check, you should write your Social Security number and what the check is for (e.g., "2010 Form 1040"). E-filers can avoid this mistake by paying electronically. If you are unable to pay everything you owe, you should send as much as you can currently afford to pay--this will reduce the penalties and interest you will owe.

An installment plan may be available if you cannot pay the amount due. Visit Installment Payments for details.

If you are paying estimates, don't forget to send them in on time. If you can't meet the deadline, send the money in as soon as possible to reduce any subsequent penalties.