As April 17 approaches one thing is certain – its that taxing time of year again. Its normal to feel some angst as you plunge into calculating your taxes. Or maybe you dont plunge – you procrastinate. After all, its stressful to even think about it.
You still have to do the work, but the annual task we all face is a little easier to manage when you avoid common filing mistakes. When you do it right, youll get your refund faster or youll avoid having to pay a penalty because youre late paying your taxes.
Take a deep breath and follow advice from the IRS and other tax experts on how to escape common pitfalls:
Its time to update your filing method if youre still mailing your return. The e-file system scans for common errors and sends the form back to you for correction. If your form is error-free, you may still have an electronic advantage – youll get your refund faster.
Correct Filing Status
This may not be self-evident, as the IRS has five options: single, married filing jointly, married filing separately, head of household or qualifying widow(er) with dependent child. You can choose only one. If you qualify for more than one status, file with the one that has the lowest tax rates. The IRS will help you figure it out with this tutorial. Yes, the IRS can be helpful.
Check Your Math
One advantage of using tax preparation software is that it performs your calculations. But you still need to enter the numbers correctly to begin with, whether youre going solo or using software. So go slowly and double check each entry. Its easy to transpose figures or to fat finger an entry. If the IRS finds a math discrepancy, theyll let you know, but theyll also correct your error and recalculate your taxes. You dont want to trust the IRS on that, so be sure your math is correct.
Sign and Date Your Forms
As easy as it seems, many taxpayers forget to sign and date, in their rush to meet the filing deadline. An unsigned tax return is an invalid return. If youre filing jointly, be sure your spouse also signs and dates. If you file electronically, you need to enter your Personal Identification Number (PIN) to validate your form.
Direct Deposit Misrouting
You can have your refund deposited into one or more bank accounts. Direct deposit is a great way to get your refund faster. The danger lies in having to enter yet more numbers on your tax form, increasing the chances of entering a wrong account or incorrect routing number. You could lose your refund entirely if it winds up in someone elses account. The IRS has no procedure for replacing lost electronically transferred funds. So take extra care to enter your information correctly. Check with your bank if youre not sure which numbers to use.
Misspelled or Different Names
Reporting names correctly is extremely important. When your name, your spouses name or the names of your children dont exactly match the tax identification number that the Social Security Administration (SSA) has on file, youll face a delay. Its especially important to report your name correctly if you changed your name in the past year due to marriage or divorce. Before you file, alert the SSA of your new name to be sure your tax return wont trigger a problem.
The due date if you owe 2017 taxes is Tuesday, April 17, 2018. The IRS estimates that 20 percent of us wait until a week before the deadline to start work on our tax returns. If youre due a refund, you dont have to file by the deadline. If you owe money to the IRS and cant file by April 17, the IRS will charge you interest. You can file for an extension if you run out of time. An extension guarantees your refund will come late; and if you owe taxes and dont pay by the deadline, the IRS will charge you interest. So get on it early enough to file on time.
Tax Credits and Deductions
The IRS is not exactly known for generosity, but the number of tax credits and deductions available to you may be overwhelming. You subtract tax credits from the amount of taxes you owe. A popular one is the Child Tax Credit, which could save you $1,000. A nonrefundable credit means you get a refund only up to the amount you owe. A refundable tax credit means you get a refund, even if its more than what you think you owe. A deduction on the other hand, means you subtract that amount from your income before you figure the amount you owe. Confused? Check the IRS credits and deductions page for details. Still confused? Check with your tax professional for advice.
Select the Right Form
The IRS has three forms: 1040, 1040A and 1040EZ. Youll never go wrong with the basic 1040, but the other options are shorter and perhaps easier (as in EZ). If your taxes are uncomplicated and you dont want to itemize your deductions, you can save yourself some pain by using 1040A or 1040EZ. On the other hand, you may miss deductions by choosing a shorter form. Study the options and choose whats right for you and your dependents.
The Volunteer Income Tax Assistance (VITA) program offers free help in preparing your taxes if you qualify. If you earn less than $54,000 a year or have disabilities, you may be eligible to get help from IRS-certified volunteers to file your taxes electronically. Find locations for this service and a checklist of what to bring when you meet with a volunteer.
The Light at the End of the Tunnel
As Tax Day 2018 draws near, be sure to check out freebies and discounts retailers offer to tax-paying Americans on or about April 17. You could score free or cheap cookies, ice cream, sandwiches, pizza, massages and spa treatments. Happy Tax Day!