Filing taxes early? Avoid these 5 mistakes

Top IRS Audit Triggers: Nine Mistakes to Avoid

Filing taxes early? Avoid these 5 mistakes

Editor’s Note: We’ve tapped a personal finance pro at LearnVest to contribute, bringing their unique style, expertise and insight. Enjoy!

In order to quickly process millions of tax returns, the IRS has certain things that will automatically trigger an audit. That doesn’t necessarily mean you’ve done something wrong, just that the return you filed has something that might signify you’re trying to defraud the IRS.

But if you did everything correctly on your return, you should be able to prove that you are paying all of your taxes. The IRS will then agree with you and leave your return the same, and the audit will be over without any fines or (yikes) jail time. Phew!

The audit can be conducted either by mail or in person, and there are three possible outcomes:

  1. The IRS decides all is well and the return stays the same.
  2. The IRS proposes a change and you agree to it and/or pay more taxes, interest or a penalty (and in extremely rare, severe cases, forfeiture of property and jail time).
  3. The IRS proposes a change, and while you understand it, you don’t agree. In the latter case, you can appeal or enter into a mediation with the IRS.

We’ve listed the top audit triggers for you, how to know if you’re in the wrong and what proof you’ll need to ward off a full-blown audit, fines and frustration:

1. Reporting the wrong taxable income

You can’t lie about your taxable income, because both you and the IRS received your W-2 and 1099 forms, for both full-time employees and self-employed individuals.

Perfectly OK: Making a small math error. The IRS will correct that.

Not OK: Estimating or fudging how much you’ve made, even if you’re a freelancer.

The proof you need: Compare the W-2 or 1099 you receive from the company against your own records. If you think it is wrong, inform the company and ask that they file a corrected W-2 or 1099 with the IRS.

2. The homebuyer credit

If you bought a home for the first time after April 8, 2008 and before January 1, 2010, then you could have gotten the first-time home buyer credit. People who claimed the credit in 2008 treat it an interest free loan of up to $7,500.

Therefore, they must pay back the loan over 15 years by paying an additional tax.

Those who claimed it in 2009 and 2010 (and 2011 for service members) do not have to pay it back unless they move the home in the first three years after the purchase.

However, this credit has been used and abused by those trying to defraud the IRS, so they will scrutinize anyone who claimed this credit in order to exclude people who are flipping homes or speculating in real estate. For that reason, they will be checking to see if you stayed in the home for at least 36 months (three years), as required.

Perfectly OK: You bought your first home, and you’ll be living in it for at least three years.

Not OK:You bought your first home … and then promptly resold it within three years for a profit, or made another home your primary residence. You’ll need to pay back the credit in full when you pay your taxes that year.

The proof you need: Keep all records pertaining to the purchase of your home.

3. Huge donations on a small budget

The IRS will raise its eyebrows if you’re giving away large charitable donations when you don’t have much income.

Perfectly OK: You gave a generous donation to your alma mater … and then suddenly lost your job, making your income lower than expected.

Not OK: You’re getting creative with your charitable deductions. (“That 1995 Camry I gave to charity is worth at least $15,000!”)

The proof you need: Get your large donation appraised, file Form 8283 for any donation over $500, and make sure you keep all charity receipts and follow the IRS’s tips for charitable donations.

4. A steak dinner with clients

Rules for claiming this are strict, so it’s a smart idea to read up on them before trying to make the government pay for your nights out on the town.

Perfectly OK: Deducting 50% of the cost of a reasonably priced meal where you entertained potential clients for your business while discussing business.

Not OK:Deducting the cost of a lavish steak dinner with rare champagne as entertainment, and then trying to deduct it again as a travel expense. Or deducting half the cost of a concert ticket you bought from a scalper who charged you $150 more than face value. To see more instances, read this publication from the IRS.

The proof you need: Keep all receipts, and record the dates and times, description of the expense, the business purpose and business relationship. More details are here.

5. Using your car for business

Sure, a lot of people use their cars for some part of their business. But if you’re also using it to shuttle kids to lacrosse practice, it just doesn’t qualify. This is old hat to the IRS, so don’t think you can outsmart them.

Perfectly OK: The car is used solely for delivering wedding cakes to your clients.

Not OK: Sometimes you drop off deposits at the bank on your way to getting your nails done.

The proof you need: Keep a record of your mileage, and calendar entries specifying your starting and ending addresses, and business purpose for every time you use the car for business.

6. Your home office

A lot of people think they can stretch the definition of a home office, which is why claiming it could trigger an audit.

Perfectly OK: A study where you keep your computer, phone, bookshelves and other supplies for work, and where you do the majority of your work and that is not used for any other purpose, especially personal use.

Not OK:A desk with a computer in the corner of your living room or guest bedroom where you work for a few hours a week.

The proof you need: If you want to take this deduction, make sure to read IRS Publication 587. It is very detailed, and even includes a semi-fun (well, sort of) flow chart to make sure you’re on the up-and-up.

7. Tax errors

It seems obvious, but we can’t leave it off the list because it’s one of the top reasons for audits.

Perfectly OK: Simple tax mistakes small mathematical mistakes. The IRS will fix these.

Not OK:Claiming the wrong deductions and credits, filing under the wrong status and stating the wrong income.

The proof you need: Double and triple check your work before filing and, again, keep meticulous records and proof for deductions and credits.

8. Round numbers

Did you really spend $125 on this and $75 on that? If every year you have tidy little numbers, this is a common business expense tax mistake that lends the IRS to believe that you’re making some things up. Or at least keeping terrible records.

Perfectly OK: Rounding to the nearest dollar.

Not OK:Doing things from memory and rounding up to the nearest $25.

The proof you need: Have documentation for your deductions and credits, and use the actual numbers on your forms so they match your receipts and other records.

9. A business that loses money

It’s not ideal that your business loses money. (That kind of misses the point, right?) If the IRS sees someone who has a full-time business, and reports a loss in more than three years the last five, it will make them look closer.

Perfectly OK: Things didn’t go well with your business this year or last year, and you took a loss.

Not OK: You have an expensive, full-time hobby owning a vineyard or fixing up antique bicycles and you’re not even trying to make a profit.

The proof you need: You can claim a loss for your business this year—if it usually makes you a profit. You should have all the proper documentation as if it were a business, and prove that it made a profit for three five years.

Learn how to handle an IRS audit, or get help from a trusted IRS expert.

Источник: https://www.hrblock.com/tax-center/irs/irs-audit-triggers/

5 Mistakes To Avoid When Filing Taxes Early

Filing taxes early? Avoid these 5 mistakes

Have you been waiting patiently to file your taxes? If so, you're in luck. This tax season is now underway. February 12th, 2021, was the first day that the IRS would accept tax returns for the 2020 tax year, either electronic or paper copies. (You can mail in paper copies at any time, but they won't be processed until the tax season kickoff date set by the IRS.)

Why file your taxes early? A better question is: Why leave taxes hanging over your head until May and then spend a stressful week trying to complete your return? In addition, filing early can thwart any identity thieves trying to file a false return in your name – and if you have a tax refund coming, why wouldn't you want to get it as soon as possible?

Even so, early filers must take care to avoid mistakes that negate the benefits of an early return. Go-getters should consider the following pitfalls of filing early before making their decision.

1. Forgetting Forms

Understatement of the Day: Tax forms are not always straightforward, and it's not always obvious which forms you need to receive before filing.

Taxpayers with multiple income sources need a W-2 or 1099 form covering each source where you earned at least $600 throughout the year.

If the IRS receives the matching copy without your submission, at best there will be a delay in processing your form. Penalties may apply, and, at worst, an audit may follow.

In addition, remember that even if you didn't receive a 1099 from an income source of less than $600, you still must report the income.

Generally, W-2, 1098, and 1099 forms must be supplied to employees and self-employed contractors by January 31, although some 1099 forms have a deadline of February 15 and K-1 forms can take even longer. Review all of the forms that may apply and verify that you have received all necessary forms before filing your return.

Don't forget outgoing forms as well as incoming ones, especially if you itemize. Many credits and deductions require submission of a separate form to show proof of eligibility and to calculate proper amounts.

2. Ignoring 1095 Health Form Requirements

The published changes in the Tax Cuts and Jobs Act of 2017 removed the individual mandate that requires health insurance coverage. This took effect for the first time in tax year 2019.

This year's Form 1040 won't contain the “full-year health care coverage or exempt” box.

You won't need to file Form 8965 “Health Coverage Exemptions”, unless you had minimum essential coverage for part or all of 2020.

This includes most health coverage supplied by your employer, any health insurance bought on the Health Insurance Marketplace or directly from an insurance company, and coverage provided under Medicare or Medicaid.

3. Failing to Double-Check Information

Did you sign your form? Did you double-check your math? Did you download the correct year's forms and instructions? It's very easy to forget the simple things when you're in a hurry. Review your form before submitting it, and if possible, take a few minutes between filing and submission. It's difficult to proofread anything immediately after it's finished.

4. Filing an Amended Form Incorrectly

Let's say that you find a math error in your form or realize that you forgot to include a 1099 form after an early filing. Should you immediately follow up with an amended form? No. The IRS will correct your math errors and notify you about any missing forms.

However, you should file an amended return for changes in filing status, income modifications, or deduction/credit changes. Don't start over with a new 1040 form – use Form 1040X, indicating only the relevant changes. Amended returns must be paper copies – no electronic filing allowed.

5. 2021 Contributions to 2020 Taxes

Several transactions that can be made in 2021 can affect your 2020 tax submissions.

For example, you have up until the tax deadline (May 15th for 2021) to make contributions to your IRA and have them count against the 2020 tax year – assuming you properly identify the contributions as being for 2020.

If you have already filed your 2020 tax forms, you would have to file an amended return to make a contribution affecting the previous year.

The Takeaway

There are many good reasons to file your taxes early, but don't sacrifice accuracy for speed. Make sure that you have all the required forms and that any transactions that will affect the 2020 tax year have already taken place. Review your tax form carefully before signing and submitting it to the IRS.

Nobody wants to spend any more than the minimum amount of time doing taxes but think of it as an investment. Double check-your work and you'll be more ly to avoid filing an amended return – and possibly incurring an IRS audit. The money you'll save in antacids alone is well worth it.

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Originally Posted at: https://www.moneytips.com/5-mistakes-to-avoid-when-filing-taxes-early

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New W-4 Form Shows Craziness of Tax Program

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Источник: https://www.newstimes.com/business/moneytips/article/5-Mistakes-To-Avoid-When-Filing-Taxes-Early-12556956.php

10 Common Tax-Filing Mistakes To Avoid

Filing taxes early? Avoid these 5 mistakes

Monkey Business Images/Shutterstock.com

Tax preparation software is preventing more taxpayers from making mistakes on their annual tax returns.

Still, just one slip in entering information on your computer could end up costing you — in the form of a larger tax bill or a smaller refund.

Even if a mistake, whether on your computer or paper forms, doesn’t cost you cash, it could delay your refund.

Here are 10 common tax-filing mistakes that show up every tax season. As you review your tax return for filing by the April 18 deadline, make sure you haven’t made any of them.

1. Math miscalculations

The most common error on tax returns, year after year, is bad math. Mistakes in arithmetic or in transferring figures from one schedule to another will get you an immediate correction notice. Math mistakes also can reduce your tax refund or result in you owing more than you thought.

Using a tax-software program to file your return can help reduce math errors. The built-in calculators do the work for you, adding, subtracting and inserting numbers on additional forms as needed.

But you still have to make sure your initial numbers are correct. Entering $3,500 when the real figure is $5,300 makes a lot of tax difference.

Getting the numbers right is crucial because you can be sure the IRS will be double-checking numerical entries against its copies of your tax statements (W-2, 1099s and the ).

When IRS examiners find a discrepancy, they’ll definitely let you know and, in many cases, will correct your mistake and refigure your taxes for you. Don’t give them the chance. Make sure your math entries are right.

2. Computation errors

These are cousins to the standard math mistakes. In these computation cases, taxpayers or their tax pros make mistakes in figuring such tax-return entries as taxable income, withholding and estimated tax payments.

Credits and special deductions also pose problems.

Errors regularly show up, says the IRS, in figuring the earned income credit, the taxable amount of Social Security benefits or in calculating the larger standard deduction for taxpayers who are age 65 or older or blind. A common connection in all of these errors is added worksheets or forms before the amounts are transferred to the taxpayer’s Form 1040.

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3. Misspelled or different names

The IRS is all about numbers, but words — specifically names — are important, too. When the names of a taxpayer, his or her spouse or their children don’t match the tax identification number that the Social Security Administration, or SSA, has on record, that difference will cause the IRS to kick out or slow down processing of the tax return.

This often is a problem for new wives. Many women change their surnames when they marry. That’s also an option for spouses in same-sex marriages, which the IRS now recognizes. If you didn’t alert the SSA of your name change soon after your wedding, do so now to ensure that your new name won’t cause a problem when you file your first joint tax return.

And if marital bliss doesn’t last and you change your name after a divorce, make sure Uncle Sam’s appropriate agencies know that, too.

4. Direct deposit dangers

Taxpayers can have a refund directly deposited into multiple bank accounts. This option is a great way to save your refund money, but the more numbers you enter on a tax form, the more chances you have to enter them incorrectly. And a wrong account or routing number could cause you to lose your refund entirely.

You can divide your refund into 3 accounts by filing Form 8888 along with your individual return.

It’s not a difficult document to complete, but if you put in wrong account numbers, your refund could end up in someone else’s account or be sent back to the IRS.

Either way, you might not be able to retrieve your refund because there is no IRS procedure for replacing lost electronically transferred funds.

Incorrect account numbers aren’t just a problem when a refund is split multiple ways. Even if your refund is going to just one account, make very sure you enter your account and bank routing numbers correctly.

5. Additional income, additional filing work

Did you have a side job this year? If so, as a contractor you probably received a Form 1099-MISC detailing the extra earnings.

What about savings and investment accounts? For these, you should have received Form 1099-INT and Form 1099-DIV statements.

In each 1099 instance, the IRS knows precisely how much extra money (either as wages or unearned investment income) you made as soon as you did, thanks to the financial firms who sent copies of your 1099 forms to the tax agency.

If you forget to include any of these earnings on your return, the IRS examiners will let you know you owe taxes on them, too. And depending on when your oversight is discovered, you also could owe penalties and interest on the unreported earnings.

6. Filing status errors

Make sure you choose the correct filing status for your situation. You have five options, and each could make a difference in your ultimate tax bill.

If this is the first tax-filing season since your divorce and you now are a single parent, writing “head of household” probably will be more beneficial. And what if you’re still married, but you and your spouse are thinking about filing separate tax returns? That works in some cases, but not all.

Make sure you know what each tax-filing status entails, and choose the one that best fits your personal tax situation.

7. Social Security number oversights

Because the IRS has stopped putting taxpayer Social Security numbers on tax package labels in response to privacy concerns, some taxpayers forget to write in their identification numbers. Your tax ID number is crucial because there are so many transactions — income statements, savings account interest, retirement plan contributions — keyed to this number.

The nine-digit sequence is vital to claim several tax credits, such as the child tax and additional child tax credits, as well as ones for educational expenses and dependent-care costs.

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8. Complete charitable contributions

Do you give to charitable groups? All types of donations, from cash to cars, could be valuable tax deductions, so make sure you count them all when you file. Be sure to follow the donation tax rules, the most important being that you give to a qualified organization — that is, one that has tax-exempt status with the IRS.

Also be careful when calculating any gifts of clothing and household items. Tax law now requires that these donations be in good or better condition or the deduction is disallowed.

And remember that the amount you can claim for donated goods is the fair market value of the items; that’s what a willing buyer would pay for it in its current condition, not what you paid for it.

9. Signature required

Sign and date your return. The IRS won’t process it if it’s missing a John Hancock, and that means on e-filed returns, too. Taxpayers filing electronically must sign the return electronically using a personal identification number, or PIN. To verify your identity, you’ll have to provide the PIN you used last year or your adjusted gross income from your previous year’s tax return.

If you prepare your own taxes and file electronically, you must verify your identity by entering either the adjusted gross income amount from your 2015 tax return or the self-select PIN you used last year. The IRS says using an electronic filing PIN is no longer an option.

Generally, tax preparation software auto-fills this information for returning customers, but if you are using a new product for the first time, you may have to enter the information yourself.

If you’re still mailing your return, don’t be in such a hurry that you stuff your 1040 in the envelope without signing it. And if it’s a joint filing, both you and your spouse must sign.

10. Missing the deadline

Millions of taxpayers put off filing until the very last minute.

That’s OK as long as your mailed paper return is postmarked by the April filing deadline or you hit “enter” to e-file your 1040 by midnight of the deadline day.

The good news is that, because April 15 lands on Saturday in 2017, and because Emancipation Day is celebrated in Washington D.C. on Monday, April 17, the tax due date is pushed to Tuesday, April 18.

If you still can’t get your forms finished by then, file Form 4868 by the deadline. This will give you a 6-month extension, until mid-October, to submit your tax forms.

But be sure to send any tax you owe with your extension request. If you don’t, you could face late-filing or non-filing penalties. Nobody wants to pay Uncle Sam a penny more than necessary, so don’t make the mistake of missing the filing deadline.

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Источник: https://www.bankrate.com/finance/taxes/10-common-tax-filing-mistakes-to-avoid-1.aspx

Filing taxes early? Avoid these 5 mistakes

Filing taxes early? Avoid these 5 mistakes

Have you been waiting patiently to file your taxes? If so, you're in luck. The 2019 tax season is now underway. January 28, 2019, was the first day that the IRS would accept tax returns for the 2018 tax year, either electronic or paper copies. (You can mail in paper copies at any time, but they won't be processed until the tax season kickoff date set by the IRS.)

Why file your taxes early? A better question is: Why leave taxes hanging over your head until April and then spend a stressful week trying to complete your return? In addition, filing early can thwart any identity thieves trying to file a false return in your name – and if you have a tax refund coming, why wouldn't you want to get it as soon as possible?

Even so, early filers must take care to avoid mistakes that negate the benefits of an early return. Go-getters should consider the following pitfalls of filing early before making their decision.

1. Forgetting Forms

Understatement of the Day: Tax forms are not always straightforward, and it's not always obvious which forms you need to receive before filing.

Taxpayers with multiple income sources need a W-2 or 1099 form covering each source where you earned at least $600 throughout the year.

If the IRS receives the matching copy without your submission, at best there will be a delay in processing your form. Penalties may apply, and, at worst, an audit may follow.

In addition, remember that even if you didn't receive a 1099 from an income source of less than $600, you still must report the income.

Generally, W-2, 1098, and 1099 forms must be supplied to employees and self-employed contractors by January 31, although some 1099 forms have a deadline of February 15 and K-1 forms can take even longer. Review all of the forms that may apply and verify that you have received all necessary forms before filing your return.

Don't forget outgoing forms as well as incoming ones, especially if you itemize. Many credits and deductions require submission of a separate form to show proof of eligibility and to calculate proper amounts.

2. Ignoring 1095 Health Form Requirements

If you bought health insurance on the exchange for the 2018 tax year, don't be fooled by the published changes in the recent Tax Cuts and Jobs Act of 2017.

You will still receive a 1095 form indicating proof of health insurance coverage for 2018.

The individual mandate that requires health insurance coverage has been removed, but the changes won't take effect until the tax year 2019 (to be filed in 2020).

To add to the confusion, the IRS threw in a curveball by stating in 2017 that, for the first time, returns will be rejected if the taxpayer does not verify health insurance coverage on the tax form. You still don't have to include the 1095 with your submission, but you do need to indicate coverage on the form.

3. Failing to Double-Check Information

Did you sign your form? Did you double-check your math? Did you download the correct year's forms and instructions? It's very easy to forget the simple things when you're in a hurry. Review your form before submitting it, and if possible, take a few minutes between filing and submission. It's difficult to proofread anything immediately after it's finished.

4. Filing an Amended Form Incorrectly

Let's say that you find a math error in your form or realize that you forgot to include a 1099 form after an early filing. Should you immediately follow up with an amended form? No. The IRS will correct your math errors and notify you about any missing forms.

However, you should file an amended return for changes in filing status, income modifications, or deduction/credit changes. Don't start over with a new 1040 form – use Form 1040X, indicating only the relevant changes. Amended returns must be paper copies – no electronic filing allowed.

5. 2019 Contributions to 2018 Taxes

Several transactions that can be made in 2019 can affect your 2018 tax submissions.

For example, you have up until the tax deadline (April 15th for 2019) to make contributions to your IRA and have them count against the 2018 tax year – assuming you properly identify the contributions as being for 2018.

If you have already filed your 2018 tax forms, you would have to file an amended return to make a contribution affecting the previous year.

More from MoneyTips:

Источник: https://www.foxbusiness.com/personal-finance/filing-taxes-early-avoid-these-5-mistakes

As the Coronavirus Continues, Avoid These 5 Retirement Mistakes

Filing taxes early? Avoid these 5 mistakes

The COVID-19 pandemic hit hard in early 2020, and it continues to remain prevalent as we near the end of the year.

Whether you’ve just recently retired, or it’s coming up in the next few years, it’s ly the virus has brought about some financial uncertainty regarding your readiness for retirement.

Before making any sudden changes, it’s important to remain rational and avoid these five big retirement mistakes below.

Mistake #1: Neglecting Your Emergency Fund

No word describes 2020 better than “unexpected.” Therefore, it should come as no surprise that preparing for the unexpected sits at the top of our list. When times get tough, it can be tempting to forego or forget important financial habits – padding your emergency fund.

If your income has been affected by COVID-19, you may be struggling to make ends meet for the time being. But that doesn’t mean adding to your emergency fund should be the first thing to go. A little preparation now can go a long way when the unexpected does hit.

From a health emergency to car repairs, you never know what surprises may come your way in retirement.

Mistake #2: Making Unnecessary Withdrawals

Withdrawing from any retirement accounts early could mean big tax penalties and less income in retirement. While the CARES Act has temporarily waived the 10 percent penalty for early 401(k) withdrawals (up to $100,000), utilizing this option before considering other alternatives is unwise.1 

The money you withdraw from a traditional IRA will still be subject to income tax come 2021. And to avoid robbing your future retirement, you’ll want to develop a plan to replace that lost income in the coming years.

If you’re struggling to cover your expenses amidst the pandemic, talk to your financial advisor about other options you may want to take first.

Look into what relief programs your state or local government offers, tap into your emergency fund if necessary and reevaluate your budget.

Mistake #3: Making Emotionally-Driven Investment Decisions

Nobody can go a day without hearing the word “coronavirus.” From social media posts to advertisements and news outlets, there’s no escaping the pandemic. COVID-19 aside, other big news stories are hard to avoid as well – the upcoming election, the staggering rates of unemployment claims, the stock market rising and falling, etc.

After absorbing info day in and day out, it’s nearly impossible to not let it affect your decisions about money.

Should you drain your portfolio and stuff it under the mattress? Do you need to look at rebalancing assets amidst this market volatility? Working with an investment advisor can bring an objective, scientific and education-based perspective to the question of what to do with your assets. Together you can focus less on the world around you and more on your individual goals as you head into retirement.

Mistake #4: Forgetting to Reassess Your Current Budget

Have things changed since you last made your monthly budget? Maybe you used to commute to work, and now you’re working remotely. Or you used to spend every Friday at happy hour with friends, now you enjoy a quiet evening at home. It’s very ly that your daily habits, and what you spend money on, have been affected by the pandemic.

In many cases, this could be good news. You’re spending less on gas or commuter passes, travel and vacation, eating out, gyms and more.

Reevaluate what your spending has been over the past several months and determine if there are any opportunities to put more toward your retirement savings.

Depending on your timeline towards retirement, an extra couple of thousand in savings this year could grow significantly over the coming years.

Mistake #5: Ignoring CARES Act & Other Legislative Changes

The CARES Act was passed on March 27, 2020, meaning you’ve ly heard of it by now. It’s possible you even received a stimulus check in April or May. But did you know that the CARES Act offers some significant changes for retirees and those about to retire?

As mentioned earlier, the CARES Act has waived the 10 percent tax penalty for coronavirus-related withdrawals from your 401(k) account up to $100,000. 

Those who may qualify for this option include:

  • Someone who has contracted the virus
  • Those caring for an immediate family member who has the virus
  • Anyone experiencing financial distress due to being furloughed or laid off during the pandemic
  • Business owners who needed to cease operation or reduce hours
  • Any additional circumstance in which the IRS deems acceptable1

In addition, required minimum distributions (RMDs) have been waived for the remainder of 2020.1 If you don’t need this money to make ends meet, leave it in the bank to accrue more interest. Plus, your tax obligation will be lower without this additional income.

If the pandemic has created some cause for concern when it comes to your retirement, don’t hesitate to reach out to us!. We work with retirees and pre-retirees to develop retirement strategies and determine if things need to be adjusted, 

  1. https://www.congress.gov/bill/116th-congress/senate-bill/3548/text

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties.

Please consult legal or tax professionals for specific information regarding your individual situation.

The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Источник: https://carmichaelfinancial.net/articles/as-the-coronavirus-continues-avoid-these-5-retirement-mistakes

6 Common Mistakes When Filing Taxes That are Easy to Avoid

Filing taxes early? Avoid these 5 mistakes

Tax season might feel a little daunting sometimes. Mistakes might happen unintentionally when filing. We’ll review some of the most common filing mistakes so you know what to look out for.

Depending on your situation, tax season can either be a relatively straightforward process or one that requires a heavier lift on your time and energy. In order to make your taxes as stress-free as possible, here are some of the most common mistakes taxpayers make when filing and how you can avoid them.

1.  Math errors

The IRS found nearly 2.5 million math errors  on returns filed for the 2017 tax year, according to statistics for the agency's 2018 fiscal year. The errors range from a simple mistake in addition, subtraction, multiplication, or division to selecting the wrong number from a tax table or schedule.

IRS software usually catches those mistakes and would typically send you a notice explaining the error and letting you know that your refund has changed (or that you owe more money). So, resolving math errors is pretty simple, but they can delay the processing of your return.

Fortunately, avoiding simple math errors is easy. If you use tax software such as TurboTax, the program will automatically handle most calculations for you and catch any errors before sending your forms to the IRS.

2.  Choosing the right filing status for you

Selecting the correct filing status is an essential part of filing your tax return. It can impact your tax bracket, the tax credits and deductions you can claim, and the amount of tax you pay.

There are five filing statuses:

Each filing status comes with its own rules for who can select that option. If you're eligible for more than one tax filing status — say single and head of household — the choice you make could be the difference in a higher tax refund or having to pay more.

3.  Missing out on tax deductions

You might miss out on valuable tax-saving opportunities because you aren't aware of your eligibility for certain tax deductions and credits.

While the IRS will ly catch your missing W-2 income or if you've claimed someone as a dependent who's already been claimed by someone else, they won't fix your return if you forgot to claim the Child and Dependent Care Credit or the home office deduction. That means you could be leaving some serious money on the table.

The good news is TurboTax will ask you simple questions and guide you through filling out the right tax forms and help you search for the deductions you qualify for to help you get the highest possible refund or lowest amount of tax due.

4.  Forgetting important paperwork

Many taxpayers can't wait to file their tax returns because filing early means getting their refund early, and who doesn't want that? But filing too early or rushing through the process can lead to mistakes that require you to amend your tax return later.

For example, institutions and organizations issuing tax forms may sometimes send them late or send amended versions of forms a few weeks after sending the initial document.

  • Before you file, think carefully about all the activities you did that might result in someone issuing you a tax document.
  • Did you open a new investment account, make a charitable donation, pay for school tuition, or pay a student loan?
  • Make sure you have all the documents you need before filing.

5.  Entering the wrong routing or account number

If you're waiting on your refund to be direct deposited into your bank account, you'll be waiting a long time if you entered the wrong routing or account number.

  • The IRS attempts to verify routing and account numbers before depositing refunds.
  • If the number you entered doesn't pass the validation check, the IRS will usually send you a paper check instead of a direct deposit.
  • But if you enter an account number that belongs to someone else, they might receive your refund and you'll have to work with the bank to recover your refund.

Avoid the hassle and double-check your numbers before filing.

6.  Paper filing blunders

Some of the most common tax filing mistakes happen when people paper file their tax returns. For example, you might,

  • forget to sign and date your return,
  • not put enough postage on the envelope,
  • send your tax return to the wrong IRS office,
  • forget to include the necessary forms, or
  • arrange tax forms in the wrong order.

You can avoid all of these mistakes and more by e-filing your return using tax software such as TurboTax. According to the IRS , the error rate for paper returns is 21%, compared with less than 1% among e-filed returns. So, take human error the equation and e-file whenever possible.

Filing your tax return can be simple and easy. TurboTax will ask you simple questions and help ensure that you’ve filled out the correct forms and completes most calculations for you so you don’t have to worry about any of the common mistakes when filing.

Источник: https://turbotax.intuit.com/tax-tips/irs-tax-return/common-mistakes-when-filing-taxes-that-are-easy-to-avoid/L4WkkAiCT

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