The Pitfalls of Preparing Your Own Tax Return
In recent years, it has been more and more common for individuals to try to prepare and file their own personal tax return. This statistic has increased due to multiple factors, such as, economic downturn, availability of low-cost tax software, and disillusionment with dedicated tax return preparation companies. This has spurred an increase in do-it-yourself taxpayers. Unfortunately, this do-it-yourself tax preparation does have drawbacks for individuals that have a more complex portfolio.
Often, basic mistakes are made and have been known to cause delays in refund processing and sometimes have led to audits. As Accountants and IRS Mediators, we have seen many errors and have assisted many individuals in making corrections and negotiating with the IRS for reductions in penalties and fines. To help prevent some of these issues from happening, JBL Accounting and Tax Professionals have compiled a list of the…
The Top 10 Mistakes Made on Tax Returns:
- Failure to provide your Social Security Number or other required information.
Incorrect or missing social security numbers are one of the most common mistakes made in preparing tax returns. Be sure to double-check all numbers for accuracy.
- Incorrect Filing Status or Exemptions:
- Check only one filing status box.
- Check the appropriate exemption boxes and include the correct social security number for each exemption.
- Your name and the names of your spouse, dependents, and qualifying children for earned income credit or child tax credit must be exactly as they appear on their social security cards. If there have been any name changes, go to http://www.ssa.gov/gethelp1.htm .
- Enter your total number of exemptions.
- Computation Errors:
Double check all your calculations. Simple mathematical errors can cause major delays in the processing and time it takes to receive your refund. The most common computational errors include:
- Taxable income
- Withholding and estimated tax payments
- Earned income credit
- Standard deduction for those 65 or older or blind
- Taxable amount of social security benefits
- Child and dependent care credit
- Incorrect Tax Calculations
Entering the wrong tax for your taxable income and filing status is a very common mistake. If you use the tax tables, be sure to use the column that corresponds to your filing status.
- Failure to correctly enter taxes paid:
Be sure to enter your withholding and estimated tax payments on the correct lines.
- Failure to correctly identify child care providers.
Missing or incorrect provider identification numbers are a very common mistake. Like with your Social Security Number, it is imperative that you enter the correct Tax Identification Number of your Child Care Provider. Double check your entries, and verify with your provider.
- Incorrect Bank Routing and Account Numbers for Refunds
The majority of individuals are requesting direct deposit of their refunds. Direct Deposit refunds are usually received faster than requesting a physical check from the IRS. If you have chosen this method for your refund, be sure that your account number and bank routing number are correct. Incorrect numbers can cause your refund to be deposited into another person’s account or delayed.
- Failure to sign and date your return.
If you are not e-filing your return you must physically sign the return before you mail it. If you are filing jointly, both spouses must sign and date the return.
- Failure to attach all required form.
Be sure that you have a Wage or Tax Statement or Form W-2 from each of your employers. Attach Copy B of each Form W-2 and any other forms that show federal income tax withheld, such as Form 1099-R, to the front of your tax return. Combine the wages and withholdings from all of your W-2s on one return. Be sure to attach all other necessary forms and schedules to your tax return in the sequence indicated by the number in the upper right-hand corner of the form.
- Improper Payment or Mailing:
If your return shows that you owe tax, include a check or money order payable to the “United States Treasury.” If you use a payment voucher, Form 1040-V, be sure to include it with your return. You can also pay your tax with a credit card. Your payment must show the following:
- Your name
- Social security number
- Daytime telephone number
- Tax form number and year
Before you send your information, be sure to:
- Review your entire tax return carefully, since mistakes can delay processing.
- Make a copy of your signed return and all schedules for your records.
Mail your tax return in the pre-addressed envelope that came with your tax booklet. If you do not have a pre-addressed envelope, look in the “Where Do You File?” section of the tax instruction booklet or go to http://www.irs.gov/file/index.html to find where to mail your return. Use the correct amount of postage.
Double checking your return and sometimes triple checking it can prevent major delays with the IRS processing your tax refund. Remember, the tax preparation software out there is great for simple returns, but even common life events, such as a home purchase, foreclosure, short sale, the birth of a child, or the death of a spouse can lead to complications that even the best software can’t handle. Many people will qualify for more tax credits than they are aware of, and the tax software may not guide you through checking your eligibility.
It never hurts to check all of your options prior to committing yourself to self-preparation. Contact JBL Accounting & Tax Professionals for your free consultation.