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Good Money Habits: Avoid Tax Time Mistakes
by Mary Beth White
Whether you choose to prepare your taxes yourself or have them professionally prepared, there are several things that you can do to avoid costly mistakes.
1 Don’t take tax advice from someone who has little or no training. Quite often well-meaning people pass along tax advice that is inaccurate or incomplete. Remember your friends aren’t going to pay your penalties or be able to defend you if the IRS comes knocking at your door.
2 Don’t fall for the Refund Anticipation Loan (RAL) trap. These loans go by several different names, but essentially charge the uninformed consumer large fees and high interest to get a “refund” back a few days quicker and to allow tax preparation fees to be taken out. In reality, the consumer is getting a loan check, not a refund. A RAL is not the same as electronic filing, which is very inexpensive and can get you a refund back quickly.
3 Gather your information together before you start your return. If your preparer offers a tax organizer, take advantage of it to help you get things organized. If you prepare your return yourself, make a list of items you should have so you don’t file an incomplete return.
4 Be careful of computer programs for do-it-yourself returns, especially if you have a complicated tax situation. Computers are wonderful, but the old saying “Garbage In, Garbage Out” still applies to tax returns. If you don’t know if the information that you are entering is correct, chances are the computer program won’t either.
5 Always review your return before you mail or electronically file it. Double check that your name, social security number, and address are correct and that you have signed your return. Also review your return for any errors.
6 Make sure that you use the correct filing status and that you are legally allowed to claim your dependents. Also, make sure you attach necessary forms for claiming dependents that could be claimed by someone else.
7 Don’t understate your income or overstate your expenses. Make sure that you file a complete and accurate return. IRS Publication 525 provides information about types of taxable and nontaxable income. Likewise, claim all the expenses you are entitled to, but don’t claim items that are not deductible or items you don’t have support for.
8 Make sure you keep accurate records. It is generally a good idea to scan receipts in case the original receipt becomes illegible or destroyed. Business, Charitable, and Medical mileage must be well documented. Feel free to visit my website at www.mbwhitecpa.com/Resources for a downloadable mileage log.
9 One size does NOT fit all. Something that is most beneficial to one person’s tax picture may be completely useless or harmful to another. Tax benefits vary widely due to income, marital status, type of employment, and investments.
10 File on Time or File an Extension – If you do not have the time to file an accurate return by the original due date, then file for an automatic extension. Also make sure you have paid in what you think you owe (or more) by the original due date. An extension of time to file is NOT an extension of time to pay your taxes. Any excess can either be refunded to you or applied to the next year.
Gulf Coast Family Publications - Encouraging families along the Gulf Coast in Pinellas County