Watch Out for These Common Mistakes Come Tax Season
Check your math! Sounds simple but you'd be surprised how many people do not take the time to double check their math. Just do it!
Don't assume you do not have to pay the alternative minimum tax. This system was designed to prevent higher-income people from taking too much in deductions but more and more middle income taxpayers are being hit lately.
Don't forget to five-year average if you took all the money out of a qualified retirement account.
Don't forget to include your mutual funds reinvested dividends. When shareholders sell their fund shares, dividends and gains should be added into the original investment.
You may have to pay capital gains taxes on the portion of your house for which you've taken home-office deductions when you sell that home, although generally you do not need to pay taxes on up to $500,000 in profit you've made since you purchased the house.
Although most couples file jointly, it sometimes makes more sense to file separately, especially if one spouse makes significantly more income or takes more deductions than the other.
You can make more retirement contributions to an IRA, simplified employee pension (SEP) and Keogh as late as your tax filing date plus extensions.
Although you cannot make more than $3000 in investment losses claims in a year, you can carry the unclaimed amount over into following years.
Don't overpay your Social Security! Wages over $72,600 are not subject to Social Security tax.
Don't forget to include gambling losses. Gamblers can deduct losses up to the amount of their winnings. You must keep accurate and acceptable records in order to claim these deductions.
Double-check that all social security numbers (yours and your spouse's) are correctly written on the return.
Make sure you claim all dependents. (This includes elderly parents who may live with you.)
If you are single and have a dependent living with you, check to see if you qualify for lower taxes available to a head of household or surviving spouse.
You may be eligible for earned income credit, as long as you do not file as married filing separately. If your earned income and modified adjusted gross income for 1999 are less than $29,928 and you have one child ($30,580 if you have more than one child), you may qualify. If you are childless and between the ages of 25-65 and your earned income and modified adjusted gross income for 1999 is less than $10,200, you may qualify as well.
You may be eligible to claim additional standard deductions if you are blind or 65 years of age or older.
Make sure you write your social security number, form number and tax year on checks made out to the IRS.
Check last year's tax returns to see if any items can be carried over into this year, such as capital losses or charitable contributions that exceeded the amount you were allowed to claim last year.
Dependents on someone else's returns cannot claim a personal exemption on their own return.
For contributions made to an IRA account, fill out a Form 8606, even if you are not claiming any deductions for these contributions.
Recheck that you have used the correct column in the Tax Rate Table or the correct Tax Rate Schedule for your filing status.
If you regularly get large refunds, you may want to change the number of allowances you claim on W-2 forms and increase your take home pay.
Don't miss deadlines!
December 1st to set up a Keogh plan
April 17th to make your IRA contribution
April 17th to file your return or request an extension
Keep copies of all documents you send to the IRS. Never send your original documents. Always use certified mail for all important correspondence with the IRS.