The tax professionals of H&R Block in Cumming have provided readers with common tax preparation mistakes and tips to avoid them...
Between now and April 15, millions of Americans will scramble to pull together receipts, bank statements and a host of other documents in order to complete their tax returns on time.
Yet even the most organized among us can overlook important details in the rush to complete our tax returns. And these mistakes can be costly. That’s why it’s important to be wary of five common filing mistakes:
Mistake No. 1: Failing to Claim Tax Benefits That Don’t Require Itemization
Sometimes taxpayers don’t realize that they qualify for tax credits and deductions that can help lower taxable income. As a result, they can miss out on potentially significant savings. The Earned Income Tax Credit, Child Care Credit, various education tax benefits and the deduction for IRA contributions are all available tax benefits even if the taxpayer doesn’t itemize. Once the benefit has been identified, it’s important to calculate and enter the credit and deduction amounts correctly on the return.
Mistake No. 2: Not Itemizing Deductions
Some people automatically take the standard deduction instead of looking closely to see if it’s more advantageous to itemize. According to the Government Accountability Office (GAO), more than two million taxpayers use the standard deduction even though they could save more in taxes by itemizing. For example, nearly 1 million people fail to itemize mortgage interest. This results in an overpayment of more than $470 million in taxes, according to a GAO report from 2002.
In addition to mortgage interest deductions, taxpayers should consider itemizing the following:
Mistake No. 3: Missing Out on Last-Minute Tax Breaks
Taxpayers have until the tax filing deadline to make a deductible contribution to a traditional IRA. For tax year 2007, the maximum IRA contribution that can be deducted is $4,000 and $5,000 for taxpayers who are 50 or older by year’s end. Not only do contributions help taxpayers save on taxes today, but they also move them closer to a comfortable retirement. So, if you’re looking for a last-minute tax tip, opening a traditional IRA is an attractive move between year-end and April 15. The maximum contribution amount for 2008 will increase to $5,000 – $6,000 for taxpayers 50 or older – and will be adjusted for inflation thereafter.
Mistake No. 4: Omitting Key Documents
Taxpayers must remember to attach to their returns copies of supporting documents, such as W-2s, 1099s, various schedule forms and any other relevant information to validate reported income. Otherwise, there may be a delay in processing their return if the IRS requests clarification.
In addition, the IRS may modify a refund if they can’t verify the amount of taxes paid through withholding. So take an extra minute to be sure all supporting paperwork is attached to the return.
Mistake No. 5: Making Simple Errors
According to the Internal Revenue Service, incorrect Social Security numbers and numerical errors – such as miscalculations or typing mistakes – are the two most common mistakes on tax returns. Another common mistake is forgetting to sign the returns before mailing.
These simple errors often lead to delays, notices from the IRS and other problems that can be avoided by taking a few minutes to double-check all the numbers. Here are a few key points to pay attention to:
Convenient, Accurate Filing
On average, taxpayers overpay by about $400 per return each year because of missed tax benefits, so it makes sense to seek the assistance of a tax professional.
In addition, most tax preparers e-file returns to the IRS, which is another safety net to ensure the accuracy of your return and to reduce the time it takes to receive a refund.
If you need help with your taxes, it’s not too late. For more information call H&R Block of Cumming at 770-887-1650.
