It’s Tax Time: Not-So-Happy Returns

The Internal Revenue Service has posted the top dumb (my term, not theirs) mistakes taxpayers consistently make on returns. The IRS often will correct small mistakes, but it’s best to avoid them in the first place to receive your refund as quickly as possible—and attract less scrutiny from the taxman.

You may overpay if you don’t apply the lower rate of 15 percent to any qualified dividends or long-term capital gains you earn. If you forget to treat this income differently, the IRS will recalculate these items.

In figuring out the amount of income tax due, many of us get the number wrong. Either we enter the wrong filing status (Single, Married Filing Jointly, Head of Household, etc.) or calculate the amount incorrectly based on our taxable income.

Self-employed taxpayers often forget to report half of their self-employment tax on the form (or fill in the wrong number). This forces the IRS to change the Adjusted Gross Income section on the return.

Business owners often enter the wrong amount of business income or business loss on the Schedule C or C/EZ form.

One way to reduce taxes is to list your dependents in the section where you claim exemptions. Many filers forget to put in the dependent’s Social Security number, a simple mistake that will get the attention of the IRS.

Those with low to moderate wages may want to take advantage of the Earned Income Tax Credit, which gives you a dollar-for-dollar deduction against your tax liability. Be aware, however, that the taxpayer or spouse has to be between 25 and 65 years of age to qualify.

Need more tax advice? Read: "It's Tax Time So Get It Together!" for more tax preparation tips.

Leave a Reply