Income Tax Tips

Find out some of the common mistakes people make when filing their federal income tax return, and how to avoid them.

Every year, the Internal Revenue Service churns out hundreds of thousands of notices to taxpayers. If you've ever received one, you know how stressful - and scary - this can be. In many cases, however, this can be avoided if you learn to think like the IRS and understand the strange logic involved in filling out your tax return.

First of all, a few common-sense tips:

1. Write legibly. If your tax return can't be read, it can't be processed, or it will be processed incorrectly.

2. Check your math. The IRS has a department that checks your math, but if they can't figure out where some of your figures came from, they will contact you.

3. Put your Social Security number on your return (unless you are using a pre-printed label), and make sure it's the right one. If your name and Social Security number don't match, this will send up a red flag. If you have dependent children, their Social Security numbers must be reported accurately too.

Many people fill out a rough draft and then make a "good" copy that they send in. If you do this, make sure you copy from the rough draft carefully. Many taxpayers put an amount on the wrong line or miss copying an amount completely, which means, of course, an IRS notice gets sent out. Some taxpayers then send in their rough draft to prove that their return is correct as filed, but the only copy that matters is the one sent in the first place. You can even ask the IRS to send you a copy of the return you filed to see where - and if - you went wrong.

When sending in your tax return, attach only relevant forms to the front. Copies of your W-2s and any other forms showing income where federal tax was withheld should be attached. The more you staple to the front of your return, the more difficult it is for a tax examiner to check your return. Make sure things are attached securely, with a few staples (but don't go overboard).

One of the most common mistakes taxpayers make involves Social Security benefits. The form used to figure out taxable benefits is quite convoluted. Take your time with it, check it over a few times, and even get someone else to check your work. Beware of tax preparers who hand back your benefits statement and tell you your benefits aren't taxable without even filling out a form. It's usually not easy to tell just by glancing at your paperwork. Most importantly, if you have taxable Social Security benefits, be certain to put you gross benefits (total benefits you received for the year) on the line to the left of the taxable line. The IRS will check your math on the Social Security form using this number. If you do not put a number on the gross line but you have one on the taxable line, the IRS will contact you. If they do not hear from you, they will assume your gross benefits were zero, meaning you had no taxable benefits, and they will cross out your entry on the taxable benefits line. This, of course, throws your whole return off, and you could get a refund you weren't expecting.

Some taxpayers keep an unexpected or unexpectedly large refund figuring the IRS people know what they're doing. If you get an amount back you weren't expecting, find out why. Later on down the line, the IRS may find a mistake and most likely it will turn out to be yours (through IRS logic, of course). In the case of the Social Security benefits, it is the taxpayer's fault for failing to put down the gross benefits. When they received that unexpected refund, they also got a notice stating something like, "We [the IRS] have changed your return. If you think this is incorrect, please contact us." That's the IRS's way out: they gave you a chance to correct the error but you kept your mouth shut and kept the money.

Another problem taxpayers run into involves self-employment wages. If someone tells you they're paying you "under the table," first of all, that's illegal (so don't use it as an excuse to an IRS employee!) Some employers will lead you to believe you're being paid this way, and then they report your wages "over the table" - to the IRS. In this circumstance, the boss considers you a freelancer or subcontractor, not his employee. This means you must pay not only your half of Social Security and Medicare wages (normally deducted from your wages by an employer) but you must pay the employer's half as well. Since you are considered "self-employed" essentially you are your employer. You are allowed to deduct expenses to reduce the self-employment tax, but if you weren't keeping track of expenses or didn't have any, you will have to pay the entire tax.

If you get married and take your spouse's last name, the only way the IRS will know this is if you contact the Social Security Administration. If you don't, your Social Security number won't match your new name and this will cause the IRS to contact you. Your return will not be processed until you make that change with the SSA.

After checking to make sure your return is filled out accurately and completely, sign it. Quite a few people neglect to do this. It will be sent back to you for your signature, and by the time you send it back, you may miss the deadline.

Remember, if the IRS contacts you, don't panic, get to the bottom of the problem right away. Interest and penalties are growing as time ticks by, which can really add up if the fault is yours and you take a lot of time owning up to it. If you take the time to fill out your tax return carefully, you might never hear from the IRS - except when they send you a refund check.

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