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Last-Minute Tax Mistakes: Five Things You Should Know
A Tax Fact from The Tax Institute at H&R Block
Avoiding mistakes can make tax time less stressful and help ensure more savings on taxes.
Between now and April 15, millions of Americans will scramble to pull together receipts, bank statements and a host of other documents in order to complete their annual tax returns on time.
Yet even the most organized among us can overlook important tax details in the rush to complete our tax returns. And these mistakes can be costly. That's why it's important to be wary of five common filing mistakes:
Mistake #1: Failing to Claim Above-the-Line Deductions & Credits
Sometimes taxpayers don't realize that they qualify for tax credits and deductions that can help lower taxable income. As a result, they can miss out on potentially significant savings. The Earned Income Tax Credit, Child Care Tax Credit, various education tax deductions and IRA-contribution deductions are all available even if the taxpayer doesn't itemize. Once the allowable items have been identified, it's important to calculate and enter the credit and deduction amounts correctly on the return.
Mistake #2: Not Itemizing Deductions
Some people automatically take the standard deduction instead of looking closely to see if it's more advantageous to itemize. According to the Government Accountability Office (GAO), more than two million taxpayers use the standard deduction even though they could save more in taxes by itemizing. For example, nearly one million people fail to itemize mortgage interest. This results in an overpayment of more than $470 million in taxes, according to a 2002 GAO report.
In addition to mortgage interest and real estate taxes, taxpayers should consider itemizing the following deductions:
Mistake #3: Missing Out on Last-Minute Tax Breaks
Taxpayers have until April 15 of the following year to make a tax deductible contribution to a traditional IRA. For tax year 2007, the maximum IRA contribution that can be deducted is $4,000 ($5,000 if you're at least 50 years old). So if you're looking for a last-minute tax tip, opening a traditional IRA is an attractive move between year-end and April 15.
Mistake #4: Omitting Key Documents
Taxpayers must remember to attach to their returns copies of supporting documents, such as W-2s, 1099s, various schedules and forms and any other relevant information to validate reported income. Otherwise, there may be a delay in processing their return if the IRS requests clarification.
So take an extra minute to be sure all supporting paperwork is attached to the return.
Mistake #5: Making Simple Errors
According to the Internal Revenue Service, numerical errors (such as miscalculations or typographical errors) and incorrect Social Security numbers are the two most common mistakes on tax returns. These simple errors often lead to delays, notices from the IRS and other problems that can be avoided by taking a few minutes to double-check all the numbers.
This Tax Fact is brought to you by The Tax Institute at H&R Block.
To view other helpful tax information or listen to our Tax Fact podcasts, visit www.digits.hrblock.com
As always...everyone's tax situation is different, so be sure to consult a tax professional or financial advisor before making important financial decisions.
This Tax Fact is for educational purposes only and is not intended to be a substitute for seeking personalized, professional advice, nor is it intended to be used to avoid IRS penalties.
A Tax Fact from The Tax Institute at H&R Block
Avoiding mistakes can make tax time less stressful and help ensure more savings on taxes.
Between now and April 15, millions of Americans will scramble to pull together receipts, bank statements and a host of other documents in order to complete their annual tax returns on time.
Yet even the most organized among us can overlook important tax details in the rush to complete our tax returns. And these mistakes can be costly. That's why it's important to be wary of five common filing mistakes:
Mistake #1: Failing to Claim Above-the-Line Deductions & Credits
Sometimes taxpayers don't realize that they qualify for tax credits and deductions that can help lower taxable income. As a result, they can miss out on potentially significant savings. The Earned Income Tax Credit, Child Care Tax Credit, various education tax deductions and IRA-contribution deductions are all available even if the taxpayer doesn't itemize. Once the allowable items have been identified, it's important to calculate and enter the credit and deduction amounts correctly on the return.
Mistake #2: Not Itemizing Deductions
Some people automatically take the standard deduction instead of looking closely to see if it's more advantageous to itemize. According to the Government Accountability Office (GAO), more than two million taxpayers use the standard deduction even though they could save more in taxes by itemizing. For example, nearly one million people fail to itemize mortgage interest. This results in an overpayment of more than $470 million in taxes, according to a 2002 GAO report.
In addition to mortgage interest and real estate taxes, taxpayers should consider itemizing the following deductions:
- Medical expenses (health insurance premiums, prescriptions and other qualified medical expenses)
- State and local income tax and personal property tax
- Charitable contributions (to churches and other non-profit organizations)
- Out-of-pocket job expenses not reimbursed by employers
Taxpayers have until April 15 of the following year to make a tax deductible contribution to a traditional IRA. For tax year 2007, the maximum IRA contribution that can be deducted is $4,000 ($5,000 if you're at least 50 years old). So if you're looking for a last-minute tax tip, opening a traditional IRA is an attractive move between year-end and April 15.
Mistake #4: Omitting Key Documents
Taxpayers must remember to attach to their returns copies of supporting documents, such as W-2s, 1099s, various schedules and forms and any other relevant information to validate reported income. Otherwise, there may be a delay in processing their return if the IRS requests clarification.
So take an extra minute to be sure all supporting paperwork is attached to the return.
Mistake #5: Making Simple Errors
According to the Internal Revenue Service, numerical errors (such as miscalculations or typographical errors) and incorrect Social Security numbers are the two most common mistakes on tax returns. These simple errors often lead to delays, notices from the IRS and other problems that can be avoided by taking a few minutes to double-check all the numbers.
This Tax Fact is brought to you by The Tax Institute at H&R Block.
To view other helpful tax information or listen to our Tax Fact podcasts, visit www.digits.hrblock.com
As always...everyone's tax situation is different, so be sure to consult a tax professional or financial advisor before making important financial decisions.
This Tax Fact is for educational purposes only and is not intended to be a substitute for seeking personalized, professional advice, nor is it intended to be used to avoid IRS penalties.
