The following VERY topical mistakes are our top findings over the last 25 or so years. While not exhaustive we hope that at least one of our findings might greatly resemble your situation keeping further Uncle Sam prompting from your mailbox.
On a personal note, what a week it was. After a late Monday night girls basketball practice, Tuesday night pet treeing/stranded evacuation problem, we had our Annual CFA Forecast Dinner on Wednesday night followed by a Father Daughter Indian Princess event on Thursday night at the house (thanks wifey Pam for all the help.) Tonight marks a professional tennis tournament watching for the girls, much deserved down time! Our miscalculation came ahead of the long week by allowing the lovely (currently tired and grumpy) children to stay up a bit too late on Sunday night during the Super Bowl. Looking forward to the weekend, meetings with new out-of-town guests, viewing of Ragtime play, and of course tennis with Sophia our 8-year-old, and some extra sleep (hopefully haha)!
Next week brings travel out of the state late in the week as the following Monday is a holiday in honor of presidents day…but that is next week…
For now, have a great weekend and here is your dirty dozen tax mistakes!
A Dozen Common Tax Mistakes that May Cost You Money
Over the last 25 or so years we have had the opportunity to work with many clients in various different professional fields. One item they all have in common is the need to complete an annual tax return. We draw from these experiences to give you the most common tax mistakes we have seen in “Letterman like” order of frequency.
12. Missing extension deadline-Do not forget to file an extension if you are not able to make the filing deadline, extensions are easy, important, but very costly should you forget
11. Basis– Under current tax law you most likely have a basis on every item you own, be sure to include it on your reporting records, otherwise the IRS will include it with a zero basis/all capital gains
10. Not filing when needed to: When someone becomes deceased it is a very good idea to file a final return to notify the IRS, also even if your income falls under the limits for filing, often times it is necessary to file a return if there were investment or expense events in the tax year
9. Medical deductions many times are not deductible due to the limitations of inclusion, but occasionally medical expenses may drift over the inclusion areas, and tax laws change frequently; it is a good practice to keep medical records and expenses no matter the end deductibility
8. Rounding deductions: Be exact on all items, a sure way to raise a red flag is to round all of your deductions even if you are rounding down, the IRS wants and rightly expects exact numbers
7. Duplicate social security: If you switch employers during the year, it is highly likely you may have over withheld Social Security taxes, as each employer holds per his time frame of employment, the end result will be a refund of your over withheld taxes, if this occurs
6. Under Withholding: Very frequent and costly, under withholding sometimes occurs with very little tax payer changes; If you are uncertain on your amount owed, attempt to confirm you have at least paid in 110% of your prior years taxes as this will help you avoid penalties
5. Not Filing Soon After Extension: While an extension is easy to file and recommended, if you owe taxes the extension does not stop penalties, so it is always a good idea to file soon after your extension in order to lessen penalties, if any
4. Stock Option Exercise data incorrectly entered: After executing a sale of stock options, SRO, or even restricted stock, you will receive a company related tax form; We have found due to the variety of reporting methods by various different public companies this information is often miss entered on tax returns. It is not usually a tough fix, but is easiest if entered correctly with the primary return
3. Loss Carry Over: We often times see losses from prior years, left out and therefore not receiving full benefit; Be sure to carry those losses forward, either passive or active
2. Filing too Quickly: For many of us, it is hard to believe, but indeed some do file too soon and then receive a corrected statement of some type. Completing your taxes in late February is fine, but we recommend holding your personal/1040 until late March in order to hopefully wait out any corrected tax statements
And Finally, the one item we see the most, that has caused many grief, including our own personal situations:
1. Missing Interest: The most frequent item we see causing tax payer grief is the missing interest on a tax payers return. It could be an incorrect address change, forgotten account, or even a closed account that generated tax reporting early in the prior tax year, but missing interest reporting ranks as our number one problem for tax payers. Again an easy fix, but most times results in tax penalties and additional payments
We hope you enjoyed our Dirty Dozen Tax Mistakes and thank you for your time. Also a couple of useful tax related sites are as follows, the IRS Forms site, and a great site for estimating your taxes.
Have a Great Day!
8222 Douglas Ave # 590
Dallas, TX 75225