April is quickly approaching. To help you file your tax forms correctly, I listed some common mistakes you want to avoid. IRS tax publications are guides that help you with nearly every tax situation. Some commonly used ones are also included.
1) Taking a refund anticipation loan (RAL). The rate on RAL’s is sky-high and should be avoided. For example, a $61 fee for a RAL of $1,500 translates into an APR of 149 percent. If you need a quick refund, file electronically and have your refund direct deposited into your account. The IRS typically deposits refunds within two weeks.
2) A big refund. Most people like the idea of getting a large refund every year but this just means the government took too much money from your paycheck during the year. You gave the government an interest free loan on your money and they are just returning it back to you a year later with no interest. Why would you ever loan the government your hard-earned money with no interest? I would rather have that money each pay period invested in my 401(k) or an interest bearing account. If you owe money, the reverse is true; the government loaned you money and you are just repaying the government back with no interest.
3) Forgetting to deduct old refinancing points. If you refinanced your mortgage, you can deduct the points over the life of the loan.
4) “Oldster” deduction. If you are over 65 and single, you can add $1,400 to the standard deduction if you don’t itemize.
5) Overpaying for tax preparation services. Over 50 percent of taxpayers have their taxes prepared professionally but professional tax preparers are expensive and sometimes make mistakes. If you are a wage earner who takes the most common deductions, try Turbo-tax or some other tax program.
6) Incorrect or missing social security number. The IRS will automatically reject your return if your social security number is incorrect.
7) Sending the IRS your only copy. Make sure you keep a copy for your own records. You will need them if you get audited.
A partial list of IRS publications is in the table. The complete list can be found at http://www.irs.gov/publications/
|463||Travel, Entertainment, Gift, and Car Expenses|
|503||Child and Dependent Care Expenses|
|504||Divorced or Separated Individuals|
|523||Selling Your Home|