Everyday Cheapskate: Avoid These Expensive Tax Mistakes
You've rounded up your receipts, figured out all your deductions, and now you're ready to load that onto your tax forms. This is not the time to get sloppy. Make sure you don't run any of these red flags up the flagpole of your tax return, and you will greatly reduce the chances of getting hit with the most dreaded of all tax events -- the audit.
MESSED-UP MATH
Doublecheck to make sure your arithmetic is correct. Math errors are not limited only to miscalculations. They could also be truncated numbers. Negative numbers need to have brackets around them. Consider attaching a spreadsheet or adding machine tape. E-filing makes sure that math calculation errors don't occur.
SLOPPY RECORDS
If you are self-employed, your deductions need to be very carefully documented. As a member of this group, don't be tempted to blur the line between personal and business expenses, especially mileage deductions and home-office usage.
MISSING MILEAGE
Automobile logs are one of the most commonly audited items. If you take this deduction, make sure your records are detailed with beginning and ending odometer readings, location and reason for the trip.
OVERSTATING CONTRIBUTIONS
Charitable deductions that are more generous than the IRS's standard and average guidelines could give an auditor reason to pause. Taking deductions for large, noncash contributions are particularly suspect. Be sure to have all receipts showing the date of donation, the receiving organization and the valuation of the donated items to document these contributions.
WRONG TAX FIGURES
If you are preparing your own taxes, be sure you are pulling the correct numbers from the tax tables. E-filing will automatically pull the right numbers, so this is something to consider if you are opting to go it on your own, without an accountant or tax preparation professional. While the IRS Direct File pilot is now closed, the Direct File will be back in 2025. Check soon at directfile.irs.gov to see if you are eligible for Direct File. While you're there, read the reviews!
INCORRECT ID NUMBERS
The most common mistakes, according to the IRS, have to do with Social Security numbers. Make sure they are accurate and match the name(s) given. If you show dependents, you must include their SSNs. Failing to include a dependent's name and SSN can result in underpayment or being denied the earned income tax credit for qualifying individuals and families
MISSING ATTACHMENTS
Attaching the required documentation, such as W2s and 1099s, is critical. All necessary forms and schedules should be included with sequence order given in the upper right-hand corner.
FAILURE TO SIGN
Be sure to sign your return (both spouses, if filing jointly) and make a copy of it and all supporting documents for your records. Remember, being audited isn't always bad. Sometimes the IRS will discover they owe you money.
RECEIVING A SIZABLE REFUND
This is not a red flag to signal an audit, but it's a sign that you're making a colossal mistake. It means you overpay your taxes. Part of your paycheck goes missing every payday, and you need to find it. It's stupid to overpay your taxes and then find yourself running to the credit cards because you can't make your paycheck stretch far enough. Fix your withholding by using the Tax Withholding Estimator at irs.gov/individuals/tax-withholding-estimator, then visiting your employer's HR department to change the number of exemptions you are now claiming. And if you still want that big annual refund, automatically deposit the difference to a savings account every payday.
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Mary invites you to visit her at EverydayCheapskate.com, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at https://www.everydaycheapskate.com/contact/, "Ask Mary." This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of EverydayCheapskate.com, a frugal living blog, and the author of the book "Debt-Proof Living."
Copyright 2024 Creators Syndicate Inc.
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