Filing taxes: a universal fear. From a complex tax code to criminal consequences for serious errors, it’s hard to blame anyone for putting off that 1040, 1120, 990 or 5500 until the day it’s due. While tempting to procrastinate filing, it makes more sense – and saves money – to plan ahead, take your time, do some research and use the tax code to your advantage. Here are some commonly-made errors and easy tips and tricks you can use to avoid costly mistakes.
One of the most commonly-made mistakes by individuals and businesses alike is to forgo what’s rightfully yours: tax deductions and credits. This is directly related to another very commonly-made mistake: not staying up-to-date with new tax laws and new deductions or credits that may be applicable to the tax return at hand. The American Recovery & Reinvestment Act of 2009 was all over the news, but it’s safe to say that not everyone who qualified for a deduction took one. With tax credits and deductions as diverse as new car or home purchases, tax-free unemployment benefits, a health coverage and COBRA tax credit, 529 college savings plans bonuses, and renewable energy incentives, a high percentage of people qualified. It’s not too late to act: homebuyers are still eligible for an $8,000 credit if closing occurs on or before April 30, 2010. On the flip side, don’t over-credit or deduct when you file, or you’ll find yourself being flagged for an audit, which will cost time and money.
Other notable mistakes are a lack of organization, which is easily remedied by readily-available and inexpensive technology like tax planning software, and the obvious math faux-pas that occur when filling out forms (be sure to sign at the bottom, too!). Most individuals neglect to estate plan, which can save family members hours of grief, confusion and ultimately thousands in saved tax dollars. Perhaps most easy of all, don’t be one of the thousands of people across America who stand in line on April 15th (or any other deadline), skip the line and file online.
Lastly, the biggest and most devastating mistake of all is not filing. Even if companies or individuals are unable to pay the taxes due, it is of paramount importance that everyone file accurately and on-time. Whether a company, an individual or even a non-profit, criminal charges will be filed if a tax return is not filed appropriately.
“American Recovery and Reinvestment Act of 2009”. http://www.irs.gov/newsroom/article/0,,id=204335,00.html
GLO CPAs,”10 Audit Red Flags.” http://glocpa.com/newsletters/09april/RedFlags.pdf
CNN Money, “Money101 Lesson 21: Estate Planning.” http://money.cnn.com/magazines/moneymag/money101/lesson21/