Common Tax Errors to Avoid

Common Tax Errors to Avoid

Some things to remember before you sign the check

Include your Social Security number on each page of your tax return so that, if a page is misplaced by the IRS, it can be reattached.

Check that you have claimed all of your dependants, such as elderly parents who may not live with you.

Recheck your cost basis in the shares you sold this year, particularly shares of a mutual fund. Income and capital gains dividends that were automatically reinvested in the fund over the years increase your basis in the mutual fond and thus reduce a gain or increase a loss that you have to report.

Fill out Form 8606, Nondeductible IRA Contributions, for your contributions to an IRA account, even if you don’t claim any deduction for the contribution.

Be sure that your W-2s and 1099s are correct. If they’re wrong, have them corrected as soon as possible so IRS records agree with the amount shown on your return.

If you are married, check to see if filing separate returns rather than a joint return is more beneficial.

If you are single and have a dependant who lives with you, check to see if you qualify for the lower tax rates available to a head of household or surviving spouse with a dependant child.

Beekman street in New York. Photo by Elena

If you worked for more than one employer, be sure to claim the credit for any overpaid Social Security taxes withheld.

Check last year’s return to see if there are any items that carry over to this year, such as charitable contributions or capital losses that exceeded the amount you were previously able to deduct.

If you did not pay enough taxes during the year, complete form 2210, Underpayment of Estimated Tax, to calculate the underpayment penalty. You may come up with a lower penalty than the IRS would.

Don’t miss deadlines: December 31, to set up a Keogh plan; April 15, to make your IRA contribution, file your return, or request an extension.

If you regularly get large refunds, you’re having too much withheld and, in effect, giving an interest-free loan to the IRS. Changing the number of allowances you claim on a W-4 form will increase your take-home pay.