SOURCE: Illinois CPA Society
CHICAGO, IL--(Marketwired - March 25, 2014) - It only takes one mistake in entering your tax information to cost you either in the form of a larger tax bill or a smaller refund. Even if a mistake -- either on computer or paper forms -- doesn't cost you cash, it could delay the receipt of any refund you're expecting. The Illinois CPA Society has some tips to help you avoid some common tax-filing mistakes.
Double-check your math
The most common error on tax returns is incorrect math. Mistakes in arithmetic or in transferring figures will result in a correction notice. Math mistakes also can reduce your tax refund or result in you owing more tax than you thought. The IRS double-checks numerical entries against its copies of your tax statements (W-2, 1099, etc.). Using tax return programs and e-filing your returns are the best error catchers. Some programs have prompts to remind you of possible credits and deductions that may apply to you.
How qualified are your dividends?
Just don't enter your dividends -- categorize them as qualified or non-qualified. Qualified dividends have a lower tax rate, similar to capital gains rates. This is a very common error.
Did you really make those estimated tax payments?
Thought you made the payments and then got a notice saying you didn't? Did you know that you can log onto state revenue websites, such as the Illinios Department of Revenue, and find out what the state says it received from you? If you make estimated payments, check the website before you file.
Additional income, more filing
Did you have a side job this year? What about savings and investment accounts? The IRS knows how much extra money you made thanks to the copies of your 1099 forms that went to the tax agency. Don't forget to include any of this income on your return. If you don't include it, the IRS will send you a tax bill that also adds penalties and interest on the unreported earnings.
Filing status errors
Make sure you choose the correct filing status for your situation. You have five options, and each could make a difference in your ultimate tax bill. For example, if this is the first tax-filing season you've been divorced and you now are a single parent, head-of-household probably will be more beneficial than filing as Single. Also, married couples have options like filing separately for some tax situations.
Social Security number oversights
Because the IRS stopped putting taxpayer Social Security numbers on tax package labels in response to privacy concerns, some taxpayers forget to write in their numbers. Your social security is crucial because there are so many transactions -- income statements, savings account interest and retirement plan contributions -- associated with this number. It's also vital to claim several tax credits, such as the child tax and additional child tax credits as well as ones for educational expenses and dependent care costs. If you have a business and use an Employer Identification Number, make sure it is accurate and agrees with the Form 1099s that you receive.
Complete charitable contributions
Did you give to charitable groups last year? All types of donations, from cash to cars, could be valuable tax deductions, so make sure you count them all when you file. Be sure to follow the donation tax rules, the most important being that you give to a qualified organization -- one with tax-exempt status with the IRS. And it is vital to keep donation letters from charities confirming your donation and showing how much was deductible. Remember that raffles are not deductible and donations of clothing and property should not be overvalued.
Sign and date your return. The IRS won't process it if it's missing your signature, and that means on e-filed returns, too. Taxpayers filing electronically must sign the return electronically using a personal identification number (PIN). To verify your identity, you'll have to provide the PIN you used last year or your adjusted gross income from your previous year's tax return.
Find a CPA
CPA's have the specialized education and knowledge to help ensure you are avoiding common, and even undetected, tax-filing mistakes. Visit www.icpas.org for information to help you find a qualified CPA in your area.
About the Illinois CPA Society
The Illinois CPA Society, founded in 1903, is one of the largest state CPA societies in the nation, with more than 23,000 members. It is the premier professional organization that represents CPAs in Illinois. For more than a century the Society has advanced the highest ethical and financial standards of the profession, and remains a leader in educating the public on financial issues.