Avoid costly tax mistakes
You’ve rounded up your receipts, figured out all your deductions and now you’re ready to load that onto your tax forms. This is not the time to get sloppy. Make sure you don’t run any of these red flags up the flag pole of your tax return and you will greatly reduce the chances of getting hit with the most dreaded of all tax events — the audit.
1. MESSED UP MATH. Double check to make sure your arithmetic is correct. Math errors are not limited only to miscalculations. They could also be truncated numbers. Negative numbers need to have brackets around them. Consider attaching a spreadsheet or adding machine tape. E-filing makes sure that math calculation errors don’t occur.
2. SLOPPY RECORDS. If you are self-employed, your deductions need to be very carefully documented. As a member of this group, don’t be tempted to blur the line between personal and business expenses, especially mileage deductions and home-office usage.
3. MISSING MILEAGE. Automobile logs are one of the most commonly audited items. If you take this deduction, make sure your records are detailed with beginning and ending odometer readings, location and reason for the trip.
4. OVERSTATING CONTRIBUTIONS. Charitable deductions that are more generous than the IRS’ average guidelines could give an auditor reason to pause. Taking deductions for large, non-cash contributions are particularly suspect. Be sure to have all receipts showing the date of donation, the receiving organization and the valuation of the donated items to document these contributions. The workbook, Money For Your Used Clothing Tax Year 2015 contains more than 1,400 market values for common household and clothing donations that do meet IRS guidelines and makes sure your spot on with your charitable deductions is the best $20 you’ll spend (800 550-3502). Take the deductions you’re entitled to with confidence and peace of mind.
5. WRONG TAX FIGURES. If you are preparing your own taxes, be sure to pull the correct numbers off the tax tables. E-filing will automatically pull the right numbers, so this is something to consider if you are opting to do it on your own, without an accountant or tax preparation professional. Check to see if you are eligible for Free File at www.irs.gov. Look for the Free File link under “Filing & Payment” on the upper right side.
6. INCORRECT ID NUMBERS. The most common mistakes, according to the IRS, have to do with Social Security numbers. Make sure they are accurate, and match the name(s) given. If you show dependents, you must include their Social Security numbers. Failing to include a dependent’s name and Social Security number can result in underpayment or being denied the Earned Income Credit.
7. MISSING ATTACHMENTS. Attaching the required documentation, such as W2s and 1099s is critical. All necessary forms and schedules should be included with sequence order given in the upper right-hand corner.
8. FAILURE TO SIGN. Be sure to sign your return (both spouses, if filing jointly) and make a copy of it and all supporting documents for your records. Remember, being audited isn’t always bad. Sometimes the IRS will discover they owe you money.
9. RECEIVING A SIZABLE REFUND. This is not a red flag to signal an audit, but it’s a sign that you’re making a colossal mistake. It means you overpay your taxes. Part of your paycheck goes missing every payday and you need to find it. It’s stupid to overpay your taxes and then find yourself running to the credit cards because you can’t make your paycheck stretch far enough. Fix your withholding. And if you want that big annual refund, automatically deposit the difference to a savings account every payday.