Wednesday, January 09, 2008

Read My Lips. No New Tax Screwups.

NOTE: Congratulations to Kay Bell of Don't Mess with Taxes and Carnival of Taxes fame. I was unaware that she wrote for "Yahoo Finance."

Kay Bell provides ten common mistakes which could slow down return processing (and potentially a refund) or cause unexpected taxes and penalties later. The mistakes listed are:

[1] Math errors--including transpositions, omissions and arithmetic errors. Software helps but does NOT eliminate math errors.
[2] Wrong ID (SSN)numbers--you, dependents and 1099s. DON'T try to sneak in your dog.
[3] Ignoring IRS material--use those labels and envelopes where possible.
[4] Choosing an inappropriate form--easiest is not necessarily best.
[5] Omitting IRS supporting forms--you need to include the W-2; also, there is an order for those supporting forms (2106, 4797, etc.) and schedules (A, C, D, etc.) shown at the top right of the supporting form or schedule.
[6] Omitting unearned income--EASY for the IRS to catch and you may have to pay penalties as well as the extra tax.
[7] Using the wrong tax calculation--yes, the tax table is available to $100,000, but the capital gains tax calculation on Schedule D may save you money.
[8] Cash flow--don't staple a check for payment, get the details right on the face of the check or the direct deposit info for refund.
[9] Sign your return--can delay refund or even create a failure to file penalty.
[10] Overlooking the due date--it really does happen--you don't want the penalties and hassle.

Kay's list of simple but common errors is definitely worth attention.


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