We’ve all receiv a few letters that have brought black clouds to our day.  Like the bill for the third of five paymts for the Gard Growler, the revolutionary ground-hog repellant that seem such a bargain a few months ago – the agricultural “miracle’ that burn up your yard and stank up your sh.

There are, however, velopes that strike the heart with a lightning bolt of terror: the white, window, number t velope stamp with the return ress: Internal Revue Service Cter.

If you receive one of these letters take a deep brh and draw some relief from the fact that the vast majority are simple notifications of an ely fix error.  Others let you know of a minor discrepancy betwe your return and IRS records caus by something you forgot, didn’t consider relevant, or ter in the wrong place on your tax return.  Gerally, these notices have little or no tax consequces.

Notices such as these are also ely avoid.  Here are a few examples of errors taayers commonly make on their personal returns.  ing these mistakes will help you avoid unwant IRS correspondce and may ev save you some .

1. You forget to sign your return.  It’s surprising how many people who mail their returns forget to sign them. Before sealing the velope, double check and make sure you (and your spouse) have sign and dat your return in the proper place.  A return is not consider fil unless it has the requir signatures.  Mailing an unsign return could op the door to itional palties if you owe unpaid taxes.  This mistake is also ely avoid by filing your return electronically.

2. You forgot to include all income on your return.  Most businesses, banks, and investmt companies are requir to use Form 1099 to notify the IRS of the amount and type of income you earn during the year.  The IRS will compare the amounts report on these 1099s against the income you report on your tax return and adjust your return if there is a discrepancy.  If you receiv a Form 1099 – and there are many types of 1099s – be sure this income is properly report on your return or you may receive a notice from the IRS.  Also, if you change resses during the year make sure your banks, investmt companies, and business clits have your new ress.

Worri 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.

3. You forgot to make estimat tax paymts or forgot to report all the estimat tax paymts actually made.  If you made estimat tax paymts, double-check the amounts and the dates these taxes were paid. Forgetting to include a the April paymt made last year, a paymt appli from the previous year’s refund, or the January paymt made for the previous tax year, are frequt errors.

A relat error involves itemizing state taxes.  If you itemize ductions, estimat income taxes paid to states are ductible in the year paid, not the year to which they apply. For example, paymts made to your state in January of 2010 for 2009 taxes should not be report on 2009’s Schule A.  This duction will instead be report on 2010’s return.

4. Filing your tax return late wh you owe taxes. If you owe tax and file your return late, palties on the unpaid balance are 5% per month, up to 25% of the tax due.  If you file more than 60 days late, the minimum palty is $100. By comparison, the palty for late paymt of taxes due is .5% per month up to 25%.  If you are unable to pay your taxes and owe less than $25,000, include an installmt agreemt request (Form 9465) with your return.The IRS will gerally accept your request if you owe no other taxes.

5. tering a wrong social security number on your return. Transposing two numbers incorrectly is the most common form of this error.  Incorrect numbers will gerate a notice and, possibly, the disallowance of a depdt’s exemption. Don’t file your return without verifying that all social security numbers have be ter correctly – ev if you use a paid preparer.

Taking a few minutes to review your return will help you avoid these common errors, an effort that will be reward with peace of mind and an d to those heart-palpitating IRS notices.

amzn_assoc_placemt = “adunit0”;
amzn_assoc_able_interest_ads = “true”;
amzn_assoc_tracking_id = “acallresite-20”;
amzn_assoc_ad_mode = “auto”;
amzn_assoc_ad_type = “smart”;
amzn_assoc_marketplace = “amazon”;
amzn_assoc_region = “US”;
amzn_assoc_linkid = “01358b91be20242b95628fb5fe5ad2ab”;
amzn_assoc_fallback_mode = {“type”:”search”,”value”:”Today Deals”};
amzn_assoc_default_category = “All”;
amzn_assoc_emphze_categories = “1064954”;
Source

4 thoughts on “Common Tax Preparation Errors: How to Avoid a Letter from the IRS”


Leave a Reply