Common Tax Mistakes: These Can Trigger an Audit
NEW YORK ( MainStreet) If you're filing your taxes at the last minute, you're not alone: the IRS says that about a quarter of American taxpayers will wait until the final week to do so. No matter when you file, you're going to want to avoid common tax mistakes that many people make. Making a filing mistake can cost you money or can even trigger an audit.
Doing Your Own Taxes
It might not surprise you that some tax professionals would prefer that you not do your own taxes. "The reality is that this isn't something that most people do on a regular basis," says Julius Green, a tax partner at ParenteBeard. Though he does concede that those who don't itemize and have experience doing their own taxes are in a better position, he urges everyone else to hire a qualified tax professional.
Overlooking Earned Income Credits
Those making less than $51,567 per year might qualify for the earned income tax credit. There are also 28 states and municipalities with an earned income credit of their own. "If there's an earned-income credit available, people should use it," says John Heath, a directing attorney with LexingtonLaw. He urges people to make sure that they're filing the right forms to get the maximum amount that they're allowed.
Not Using the Right Filing Status
Green points out that if you got married on December 31 of last year, the IRS considers you married for the entire year. "You have a choice to file jointly or separately," he says, "but you can't file as single."
Claiming the Wrong Number of Dependents
You might think that claiming the wrong number of dependents isn't the type of thing that could happen by accident, but Green disagrees. "Couples who file separately might not communicate about who is claiming which dependent," he explains, adding that it's common with higher-income individuals. "People need to be on some same page with regard to who is claiming which dependent."
Not Claiming Your Side Job
Everyone should know that money you make on weekends or even seasonally counts as income; if you filed a W9, which you should have, the IRS already knows that you earned it. Leaving it out is a good way to invite an audit. While there are ways to shelter income from second jobs, Heath reminds us to "make sure that all income is reported -- the last thing you want is an audit."
A Dozen Small Mistakes
It's not just the big mistakes that can give you trouble come tax season. The little ones can be equally problematic. Some small mistakes easy for anyone to make (and underscore the need to hire a tax professional) include:
- Not Signing Your Forms: Heath points out that a simple lack of signature can delay your refund for weeks.
- Using the Wrong Forms: This is particularly important for people who have more than one type of income, says Heath.
- Missing the Deadline: You can file an extension to get all your information together, but both of our tax experts reminded us that the extension applies to the forms themselves, not what you owe the IRS. "If you try and pull one over on the IRS by estimating that you don't owe anything," says Green. "You're going to get a tax bill in September with penalties and interest."
- Failure to File: "Every adult who can is supposed to file a return," says Heath. Failing to do so is going to mean penalties and interest, as well as missed income credits.
With the deadline bearing down, sit down with this article in hand and make sure that you've crossed all your Ts and dotted all your Is -- and that you get the maximum return that you're legally allowed.