Online tax services help many taxpayers in filing their own tax returns, but these services are limited and may not catch or recognize an error. Seeking a tax expert, is the best way to prevent mistakes and attracting an IRS audit.
Avoid these top 10 mistakes!
1. Not claiming paid property taxes
Many taxpayers are not aware that paid property taxes on more than one property are considered itemized deductions! Under the new tax law, a total of 10,000 in property taxes and state and local sales tax are deductible if the taxpayer itemizes.
2. Overpaying taxes on the sale of your home
Taxpayers may not know about Section 121 Exclusion. This is a huge tax savings! Taxpayers may, if eligible, exclude the first 250,000 or 500,000 for married couples, on the total gain made from the sale of their home.
3. Missing the state income tax deduction
State tax credits for taxes paid to other states is one tax credit that is overlooked or just not known by taxpayers. For example, lets say you moved to another state mid-year and had to file and pay taxes in both states. The taxpayer can claim a tax credit for the taxes paid to the state they moved from.
4. Choosing the wrong filing status
A taxpayer can select the wrong filing status on a tax return, causing them to loose additional tax savings. If a taxpayer qualifies to file as head of household, but chooses single, their standard deduction is reduced by 6,000!
5. Over contributing to a retirement account
While taxpayers may contribute to their retirement accounts, over contributing can cost the taxpayer money! Contributions are limited based on income.
6. Failing to file
Not filing your tax returns may not seem like a big deal, but it is! There are costly penalties for failure to file and for taxes owed. If you are due a refund there are statutory limitations to claiming a refund!
7. Mathematical errors
Mathematical errors are all too common when taxpayers decide to prepare their own tax returns. Whether its rounding or claiming the wrong exemption or standard deduction amount, avoid these common mistakes by using an online tax service or hiring a tax expert. Keep in mind, online services can't tell if a number was transposed!
8. Not filing an extension
Taxpayers may need more time to file their taxes, but forget to file an extension. Extensions are not automatic! They must be filed with the IRS by the tax filing deadline. Keep in mind, extensions do not stop penalties and interest from accruing on taxes due.
9. Incorrect names and social security numbers
It is important a taxpayer's name matches their social security card. Many tax returns are rejected for this exact reason.
10. Using the wrong date of birth
If in doubt, double check your records! Entering in the wrong date of birth will not only cause the tax return to be rejected, but the wrong date could affect how your taxes are calculated.