Are you at risk for making these common tax preparation errors?
At best, tax preparation errors can go undetected. However, at worst, tax preparation errors can result in a rather hefty fine from the IRS or even jail time. In fact, a Cedar Hill couple recently received a conviction leading to 15 years in federal prison for tax preparation fraud.
If you want to avoid the consequences associated with tax preparation fraud, make sure to avoid the top 10 tax preparation errors seen in over 80% of the tax returns reviewed each year.
These common tax preparation errors include:
Without a doubt, the most common tax preparation errors we see every year are those relating to arithmetic. Not only can mistakes in arithmetic or transferring numbers between schedules cause you to get a correction notice from IRS, but it can also result in you owning more money or the reduction of your tax refund.
Another common mistake we see in tax preparation errors is misspelled names. Not only is it very easy to misspell names, but these errors could slow the IRS down when it comes to processing your tax return. If the errors are significant, you may have the tax return kicked back to you so that you can make corrections.
Incorrect Bank Account Numbers
If you earned a hefty tax return, the last thing you want is for the money to end up back in the hands of the IRS or in the bank account of another person. Therefore, you should take care to check the bank account numbers on your tax return for accuracy.
Another common tax preparation error we see is the omission of additional income. If you had a side job as a contractor, you need to fill out the Form-1099 MISC. You need to fill out Form 1099-INT and Form 1099 DIV if you have savings and investment accounts.
Social Security Number
Many taxpayers forget to put their social security number on their tax return. If you don’t put this number on your tax return, the IRS will be unable to track your financial transactions and you won’t be able to claim tax credits.
Not only does your tax return need your signature, but it should also have the signature of the CPA who helped you file the tax return. The IRS will refuse to file your tax return if you don’t sign and date it.
No matter how tempting it may be, you should not go “shopping” for the best refund without having any regard for accuracy. Tax preparers who are really aggressive when it comes to reimbursements can potentially get you into trouble with the IRS.
Real Estate Deductions
Many individuals make the mistake of taking losses on their rental properties to lower their taxable income. In general, only real estate professionals are permitted to do this.
If you donate to charity, you should note them on your tax return as tax deductions. It doesn’t matter if the donation was in cash or in the form of a physical object, such as a car.
Filing Status Errors
The final common mistake we see is filing status errors. Ensure you pick the filing status that pertains to your situation.
Even if you choose to have a CPA help you file your tax return this year, be sure to avoid these tax preparation errors to ensure you don’t suffer penalties at the hands of the IRS.
To achieve the peace of mind that only professional tax preparation can give, contact our team at Incompass Tax & Accounting today. We will ensure you avoid tax preparation errors and give you the expert assistance you need.