Avoid the top 7 tax filing mistakes!
As the tax filing season looms ahead of us, here is a list of the most common issues that trip-up our tax preparation clients. While we can do a lot to minimize your tax liability, we cannot work with information we do not have!
1. Missing a tax form. You will receive a tax form in the mail from each bank you have an account at, each job or source of income you receive payment from, each retirement account you withdraw money from, and each investment account. The IRS also receives copies of these documents, and if you forget to file one you are pretty much guaranteed to get audited and charged penalties and interest!
2. Missing out on deductions and credits. The IRS offers credits for a wide range of expenses, including: education, childcare, foreign earned income, retirement contributions, and certain types of investments. Bring in any receipts and documentation related to these expenses so we can determine if you qualify for the credits.
3. Mis-understanding what a filing extension is. An extension allows you to file your tax paperwork at a later date - however, your tax payments are still due on filing day. If you pay your taxes late, the IRS will charge you penalties and interest. So when we file an extension for you, we will estimate the amount of tax you owe and you will make a payment for this amount. If you over- or under-pay, you settle this amount with the IRS when the paperwork is filed.
4. Wrongly classifying a dependent. Dependents have to pass relationship, residency and support tests. A divorce decree does not determine which party gets to claim a child as a dependent. There are at least three child-related tax credits, and cooperation between parents is important to minimize your tax liability. We need to be able to speak with you about the different test to determine if you can claim an individual (no pets!) as a dependent.
5. Choosing the wrong filing status. There are five different filing statuses, but only one is right for your financial situation. If you were married, divorced, widowed or had children in the last year, your preferred filing status may change. Be sure to let us know if any of the above happened to you in the last year.
6. Not updating your address when we file your return. If you have moved, we need your most current address - not where you lived during the tax year, or the last address on your driver's license, or the address on file with your employer. Without your current address, the IRS doesn't know where to send your refund or tax notices. The IRS is holding $1.4 Billion in refunds that it has no current address to deliver to, and Michigan is one of the top ten states for undeliverable tax refunds.
7. Giving us incorrect or outdated direct-deposit information. Double-check your bank account and routing numbers please! If the account number is wrong, the IRS cannot issue you a refund!