12 Common Tax Mistakes That Waste Time and Money

Experience is simply the name we give our mistakes. – Oscar Wilde

As parents know, some lessons are best learned the hard way. Taxes, however, aren’t one of those times.

Messing up on taxes is common. In the best cases, it could mean a delayed refund. But it could also mean a smaller refund, spending extra money and time to amend your return, or in the worst case, facing an audit.

Tax software helps avoid a lot of errors – especially the math kind – but it can’t fill out personal information or replace common sense. These days, that’s where the most frequent mistakes happen.

In the video below, Money Talks News founder and CPA Stacy Johnson covers some of the most common tax errors. Check it out, and learn more on the other side….

The tax code runs thousands of pages and is constantly changing, so it’s easy to make mistakes. But experience shows we tend to make the same ones, over and over. Here’s a checklist to help you out…

1. Social Security info

What’s on your Social Security card goes on the return – if your name is wrong there or has been changed, contact the Social Security Administration. Getting your number wrong, or that of a dependent or spouse, is even worse: The number might belong to someone else. This kind of error can completely stop the whole process.

2. Math

Software can help, but not every program spells out every step of the process. In some cases you may still have to tally numbers on the side to enter totals. When you do, triple-check your work.

3. Signature

It’s like turning in homework without your name on it: no name, no credit. Make sure you sign your return – and the check, if you’re sending one. Otherwise you may face delays or penalties.

4. Wrong form

Again, software often helps here by picking the relevant forms. But sometimes using a 1040EZ won’t get you as much money as a 1040 or 1040A. And certain situations require additional forms or numbers in different places. For instance, where you claim a home office deduction differs depending on whether you are an employee, self-employed, or a business partner.

5. Paying

There are a lot of tax software options, with varying fees for preparing, filing, and amending, not to mention state returns if that applies. But if your income is under $51,000, chances are you can get your taxes prepared and filed for free. Check out 4 Ways to Get Your Taxes Done Free.

6. Going pro

If you have a simple tax situation that hasn’t changed much since last year, there’s no reason to pay a professional: All they’re going to do is use the professional version of software you can buy (or get free) yourself. Check out 9 Tips to Pick a Tax Pro– If You Need One.

7. Waiting on a check

Filing your return electronically through the IRS Free File is always free, no matter your income. But however you file, do it electronically and sign up for direct deposit and your refund will most likely hit your account in less than two weeks. Just don’t forget to triple-check your bank account number to make sure the money doesn’t end up in someone else’s account.

8. Hiding income

This can happen accidentally if you have multiple employers, or if a W2 or 1099 goes missing. So take your time, think it through, and make sure you report everything – not just from your job but also investments and anywhere else that might be reporting to the IRS. Ideally you’ll track this throughout the year so you can’t forget.

9. Missing deductions and credits

Polonius from Hamlet said, “Neither a borrower nor a lender be.” He was a jerk.

But he was right too – don’t leave money on the table, at least not for the government. Did you buy a home in the past year? Go back to school? Life changes and major purchases may mean tax benefits. And don’t forget to see if you can claim a home office deduction.

10. Taking out a refund loan

If you’re desperate for your refund money, realize the interest charges on a refund anticipation loan or check only make things worse. Read why in our story from last year, Kiss Refund Loans Goodbye, and learn about a better idea: changing your tax withholding so you get bigger paychecks year-round.

11. Procrastinating

Tax Day is April 15 – and many people have already received their refunds. From the date this article was published, you have 53 days to get the job done right. So don’t short-change yourself literally and figuratively by waiting until the last minute, and then rushing through it. That’s how you make dumb mistakes and forget things that could have lowered your bill or gotten you more back.

12. Blowing it

Once you get your refund, don’t make the mistake of misspending it. Use it wisely: to pay down debt, get tax advantages for next year, or at least do something memorable and fun. Whatever you do, don’t fritter it away. We’ll have a story next week on smart uses for your tax refund.

This article was originally published on MoneyTalksNews.com as '12 Common Tax Mistakes That Waste Time and Money'.

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Avoid the Most Common Tax Mistakes to Get a Faster Refund

As the United States tax code clocks in at 18,500, pages, it's easy to see how taxpayers can make a mistake or two when filing federal income tax forms. And with over 97,000 full-time employees, you can bet it's not going to go unnoticed.

Here are some of the guiltiest repeat offenders -- steer clear of them and you'll get your refund faster and can avoid having your IRS agent over for a cup of tea.

1. Sign on the dotted line.

Probably the easiest part of preparing your taxes is signing your John Hancock, but it's still one of the most common mistakes year after year. The IRS will not accept your return if you fail to sign and date your income tax form. It delays the process and your refund. Remember also that when filing jointly, both spouses must sign.

2. Check the right box.

Another common mistake is checking the wrong filing status. You have five choices: Single, married filing jointly, married filing separately, head of household and qualifying widower. Taxpayers often incorrectly claim head of household filing status without meeting the requirements. You can qualify for head of household status (and a larger deduction) if you are unmarried at the end of the year, have cared for a closely-related dependent for over half the year and paid more than half the cost of maintaining a home for yourself and your dependent.

3. Be a diligent scribe.

This is another mistake that you can sidestep if you're just a little more careful. The names and Social Security numbers for the taxpayer, the taxpayer's spouse, dependents and children who qualify for the Earned Income Credit or Child Tax Credit must be included on the return exactly as they appear on their Social Security cards.

4. Show them the money.

According to the IRS, taxpayers often make the mistake of failing to report income that's not included on a W-2 or 1099 form, including rental income and self-employment income. If you neglect to report that type of income, it may cost you in the long run: The IRS can assess interest and penalties, not to mention criminal prosecution. Don't risk it.

5. Get the numbers right.

One of the top reasons the IRS adjusts returns is math mistakes, so get out that calculator and start number crunching. It also doesn't hurt to have a second set of eyes check your work. This is another advantage to filing online -- the electronic filing software double-checks your math.

An error-free return means faster processing and a faster refund check for you, so cross your T's and dot your I's and before you put it in the mail, make a copy.

View the original article here

Lesser-Known (But Common) Tax Mistakes to Avoid

The April 15th deadline is quickly approaching. For those who have yet to file, this can be an overwhelming time. When rushing to get taxes prepared, sometimes things go wrong. Before you sit down to prepare your taxes, relax, and take a few minutes to review these eight common yet lesser-known tax mistakes.

Entering incorrect Social Security number. Make sure you've entered the correct Social Security numbers for yourself, your spouse and any dependents. Your Earned Income Tax Credit (EITC) and other dependent-related tax benefits could be at risk if you enter an incorrect Social Security number for your dependent child.

Not claiming all dependents. Are you caring for a parent or supporting a friend? If so, he or she may be claimed as a dependent. The same is true for your kids in college. On your 2012 tax return, you can claim a $3,800 dependent exemption deduction per dependent. The exemption reduces the portion of your income subject to federal tax--just be sure no one else is claiming the same dependents as you. For example, you and your sibling can't both claim your parent as a dependent.

Not comparing this year's return to last year's. Take a look at your completed return and paperwork from last year. It might remind you of a deduction you took in 2011 and you are eligible for in 2012.

Overlooking irregular deductions. There are a number of unusual expenses that can be deducted. For instance, you may be able to deduct job-related expenses. Some credit card companies and banks itemize a year's worth of expenditures for you and enable you to sort them by category online. If you use personal finance software, spend some time going through all the categories to ensure you're not missing out on a deduction.

Not filing electronically. Doing your taxes with software and e-filing reduces common mistakes, as many common errors are corrected by computer software. When you e-file with direct deposit, you also get your tax refund faster than paper filing.

Not disclosing all your income. In the last-minute rush, taxpayers often forget important tax documents. Make sure you have important tax forms like W-2s and 1099s in front of you when you sit down to prepare your taxes. If you have multiple employers, or if a W2 or 1099 goes missing, you may end up accidentally forgetting to disclose all your income.

Forgetting to sign. It sounds basic, but not everyone remembers to sign their tax return and their check to Uncle Sam (if they owe money). Check to make sure you've signed in the appropriate places; otherwise, you may face delays receiving your refund.

Wasting your refund. If you're due a tax refund, plan ahead for what you'll do with it before it arrives. Use your windfall to pay down debt. Invest it in tax-deferred retirement accounts. Put it in a savings account for the inevitable rainy day. Use it to take a class to help advance your career or take a nice vacation. The worst thing you can do is spend your refund on something you'll forget about a month or two later.

Lisa Greene-Lewis, Lead CPA, American Tax & Financial Center at TurboTax, has more than 15 years of experience in tax preparation, including positions as a public auditor, controller, and operations manager. For up-to-date tax tips and tax news, go to the TurboTax Blog.

More From US News & World Report

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Common Ground in Washington for Medicare Changes

While the two remain far apart on the central issue of new tax revenue, recent statements from both sides show possible common ground on curbing the costs of Medicare, suggesting some lingering chance, however small, for a budget bargain.

Mr. Obama assured House and Senate Republicans during recent separate visits that he could support specific cost-saving changes to Medicare and deliver Democratic votes, though only as part of a “balanced” package that had additional revenues.

Several changes are likely to once again be in his annual budget, which will be released on April 10, after Congress returns from its break. Mr. Obama also plans a dinner with Senate Republicans that night.

In particular, participants say, the president told House Republicans that he was open to combining Medicare’s coverage for hospitals and doctor services. That would create a single deductible that could increase out-of-pocket costs for many future beneficiaries, but also could pay for a cap on their total expenses and reduce the need to buy Medigap supplementary insurance.

Representative Eric Cantor of Virginia, the No. 2 House Republican, proposed much the same in a speech in February. “We should begin by ending the arbitrary division between Part A, the hospital program, and Part B, the doctor services,” he said. “We can create reasonable and predictable levels of out-of-pocket expenses without forcing seniors to rely on Medigap plans.”

While Mr. Cantor’s proposal got little attention at the time, its echo by Mr. Obama hints at a new route toward compromise — in contrast with the budget that House Republicans passed this month that has no chance of Senate approval.

At a time when retiring baby boomers and mounting medical prices have made federal health care spending the biggest single driver of the nation’s rising debt, the House budget from Representative Paul D. Ryan, Republican of Wisconsin, would transform Medicare into a voucherlike system known as premium support, which Mr. Obama and Democrats adamantly oppose. But Mr. Cantor, like Mr. Obama, is suggesting cost-saving changes within the existing Medicare program.

To Senator Mark R. Warner of Virginia, a Democrat who has long led a bipartisan group of senators seeking a fiscal deal, such a proposal is the sort of newer idea needed for the parties to stop the “stale arguments” that after three years have turned their budget battling into “World War I trench warfare.”

“You’ve got a whole lot of folks on the Republican side saying, ‘Well, we don’t really like what Ryan has done — premium support — but we want systemic reform,’ ” Mr. Warner said at a round table hosted by Bloomberg News.

Mr. Obama’s openness to Medicare changes seemed to be news to many Republicans, even though he first proposed detailed ideas in 2011. Republicans often accuse the president of opposing changes in entitlement spending while focusing on raising taxes, an attack that ignores his proposals but also reflects how little Mr. Obama has talked about them.

Still, the same hurdle to compromise stands: The president and his party will not support even his Medicare proposals unless Republicans agree to raise taxes on the wealthy and some corporations. Without that trade-off, common ground on Medicare will remain unplowed.

“The president has said this to the Republicans: ‘You want to do entitlement reform? I do, too. I can produce entitlement reform and bring Democrats to the table, because I am a Democratic president. And so I’m ready to sit down with you and work out an approach,’ ” Senator Richard J. Durbin of Illinois, a Democratic leader, said at a recent forum hosted by The Wall Street Journal.

Many Republicans remain distrustful of Mr. Obama. Yet when they speak of altering Medicare, not replacing it, it is clear that they share some concerns about the existing program.

Representative Kevin Brady, Republican of Texas and chairman of a health subcommittee, said the structure of the traditional fee-for-service Medicare is “outdated and confusing.”

View the original article here

Common Ground in Washington for Medicare Changes

While the two remain far apart on the central issue of new tax revenue, recent statements from both sides show possible common ground on curbing the costs of Medicare, suggesting some lingering chance, however small, for a budget bargain.

Mr. Obama assured House and Senate Republicans during recent separate visits that he could support specific cost-saving changes to Medicare and deliver Democratic votes, though only as part of a “balanced” package that had additional revenues.

Several changes are likely to once again be in his annual budget, which will be released on April 10, after Congress returns from its break. Mr. Obama also plans a dinner with Senate Republicans that night.

In particular, participants say, the president told House Republicans that he was open to combining Medicare’s coverage for hospitals and doctor services. That would create a single deductible that could increase out-of-pocket costs for many future beneficiaries, but also could pay for a cap on their total expenses and reduce the need to buy Medigap supplementary insurance.

Representative Eric Cantor of Virginia, the No. 2 House Republican, proposed much the same in a speech in February. “We should begin by ending the arbitrary division between Part A, the hospital program, and Part B, the doctor services,” he said. “We can create reasonable and predictable levels of out-of-pocket expenses without forcing seniors to rely on Medigap plans.”

While Mr. Cantor’s proposal got little attention at the time, its echo by Mr. Obama hints at a new route toward compromise — in contrast with the budget that House Republicans passed this month that has no chance of Senate approval.

At a time when retiring baby boomers and mounting medical prices have made federal health care spending the biggest single driver of the nation’s rising debt, the House budget from Representative Paul D. Ryan, Republican of Wisconsin, would transform Medicare into a voucherlike system known as premium support, which Mr. Obama and Democrats adamantly oppose. But Mr. Cantor, like Mr. Obama, is suggesting cost-saving changes within the existing Medicare program.

To Senator Mark R. Warner of Virginia, a Democrat who has long led a bipartisan group of senators seeking a fiscal deal, such a proposal is the sort of newer idea needed for the parties to stop the “stale arguments” that after three years have turned their budget battling into “World War I trench warfare.”

“You’ve got a whole lot of folks on the Republican side saying, ‘Well, we don’t really like what Ryan has done — premium support — but we want systemic reform,’ ” Mr. Warner said at a round table hosted by Bloomberg News.

Mr. Obama’s openness to Medicare changes seemed to be news to many Republicans, even though he first proposed detailed ideas in 2011. Republicans often accuse the president of opposing changes in entitlement spending while focusing on raising taxes, an attack that ignores his proposals but also reflects how little Mr. Obama has talked about them.

Still, the same hurdle to compromise stands: The president and his party will not support even his Medicare proposals unless Republicans agree to raise taxes on the wealthy and some corporations. Without that trade-off, common ground on Medicare will remain unplowed.

“The president has said this to the Republicans: ‘You want to do entitlement reform? I do, too. I can produce entitlement reform and bring Democrats to the table, because I am a Democratic president. And so I’m ready to sit down with you and work out an approach,’ ” Senator Richard J. Durbin of Illinois, a Democratic leader, said at a recent forum hosted by The Wall Street Journal.

Many Republicans remain distrustful of Mr. Obama. Yet when they speak of altering Medicare, not replacing it, it is clear that they share some concerns about the existing program.

Representative Kevin Brady, Republican of Texas and chairman of a health subcommittee, said the structure of the traditional fee-for-service Medicare is “outdated and confusing.”

View the original article here