Avoiding Common Tax Errors

We’ve all received a few letters that have brought black clouds to our day.  Like bill for third of five payments for Garden Growler, revolutionary ground-hog repellant that seemed such a bargain a few months ago, but which remains unopened in gage.

re are, however, envelopes that we receive designed to create a hail-driven stampede back to porch.  One sure-fire lightning bolt of terror: a white windowed size ten envelope with return address: “Internal Revenue Service Center. 

When this happens my advice is to take a deep breath, smile, and go take a walk.  Dw some faith from fact that vast majority of such letters are a notification of an error that is easily fixed.  Ors let you know of a minor discrepancy between your return and IRS records caused by something you forgot, didn’t consider relevant, or entered in wrong place on your tax return.  ly, se notices have little or no tax consequences.  Such letters are also easily avoided.  Here are a few examples of errors taxpayers commonly make on ir personal returns.  Understanding se mistakes will help you avoid unwanted IRS correspondence.  It may even save you some money.

First: you forget to sign your return.  It’s surprising how many people mail ir returns to IRS without a signature. Before sealing envelope, double check to make sure you (and your spouse) have signed and dated your return in proper place.  A return is not considered filed unless it has required signatures.  Mailing an unsigned return could open to additional penalties if you owe unpaid taxes.  This mistake is also easily avoided by filing your return electronically. 

Second, you forgot to include all income on your return.  es use Form 1099 to notify IRS of amount and type of income you earned in 008.  IRS checks amounts reported on se 1099s against income you report on your tax return.  If you received a Form 1099 (re are many types of 1099s), be sure this income is properly reported on your return or you may receive a notice from IRS.

Worried that you may not be in compliance with form 1099-MISC? Check out our 1099-MISC Basics course to get all of your compliance questions answered.

A third common error: you forgot to make estimated tax payments or forgot to report all estimated taxes actually made.  If you made estimated tax payments, double-check amounts and dates se taxes were paid. Forgetting to include a payment, especially April payment from previous year or January payment of current year, is a frequent error. 

A d error involves itemizing state taxes.  If you itemize deductions, estimated income taxes paid to states are deductible in year paid, not year to which y apply.  For example, payments made to WV in January of 009 for 008 taxes should not be reported on 008’s Schedule A.  This deduction will be reported on 009’s return. 

A fourth, more costly error is filing your tax return late when you owe taxes.  If you owe tax and file your return late, penalties on unpaid balance are 5% per month up to 5% of tax due.  If you file over 60 days late, minimum penalty is $100.  By comparison, penalty for late payment of taxes due is .5% per month up to 5%.  If you are unable to pay your taxes and owe less than $5,000, include an installment agreement request (Form 9465) with your return.  IRS will ly accept your request if you owe no or taxes. 

A final mistake is entering a wrong social security number on your return. Tnsposing two is most common form of this error.  Incorrect numbers will genete a notice and, possibly, disallowance of a dependent’s exemption. Don’t mail return without verifying that all social security numbers have been entered correctly.

Take a few ext minutes to review your return and avoid se common errors.  Your efforts will be rewarded in peace of mind and unwanted mail from IRS.

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