tax return

OOPS! COMMON ERRORS WHEN PREPARING A TAX RETURN

common-tax-errors

It’s a good feeling when you complete your tax return. Now the last thing to do is hit the submit button and send it off to the IRS….not so fast! Check out these common errors first to avoid frustration and wasted time down the road.

E-file your return – Ok so this isn’t really an error but a way to avoid errors. E-filed returns are processed through the IRS e-file system which often detects common errors before it gets sent to the IRS. I’m always impressed when I see people bringing in their hand filled out tax returns but they are rarely free from errors. Time to switch to e-file and avoid simple mistakes.

Check the Easy Inputs – It sounds simple but double check your social security number, name, current address, and zip code. These all could affect your tax return and more importantly your refund. Many times people move but fail to update their tax return because the data is pulled forward from a prior year return. Note, Social Security Numbers should be listed exactly as they appear on your social security card. Save yourself the hassle and check the easy stuff.

Filing Status – Make sure you check your filing status. Married Filing Jointly and Single are easy but are you sure you don’t meet the criteria for head of household? It’s worth checking to make sure because it could save you some money. Check this link to make sure you’re filing the right tax status. What is my Filing Status?

Exemptions – Did you take all of your exemptions? There are personal, spousal, and dependency exemptions. Make sure you take all the ones you are eligible for. Review these two pages to see if you qualify. Personal/Spousal Exemptions and Dependency Exemptions.

Paper Filing – If you insist on doing things the old fashioned way make sure you list all income, credits and deductions on the correct lines and use the appropriate schedules. Don’t forget to put brackets around your negative amounts. And double check your math!

Standard Deduction isn’t so standard – If you are taking the standard deduction and are over the age of 65 did you find the correct “standard deduction” using the chart included in the 1040 instructions. Look here to make sure - How Much Is My Standard Deduction? 

Taxes Owed – Did you figure your tax liability correctly? Use this tax table to make sure. Don’t forget to us the correct column based on your filing status. Tax Tables

John Hancock – Did you sign the return? If filing a joint return, did your spouse sign and date the return?

Attachments – Did you attached all of the correct forms to your tax return? You should include a W-2 from each of your employers (copy B) and 1099-R’s? This is only necessary for paper filers. Just another reason to e-file.

Payments – If you we tax did you include a check or money order with your tax return? Is the check made payable to the “United States Treasury” and does it include your name, address, social security number, phone number, tax form, and tax year? For Minnesota tax make sure the check is made out to Minnesota Revenue and includes the same information as your federal payment. If using a payment voucher make sure you include the voucher with the payment. If using direct debit/credit check and double check your account number and routing numbers. This is an easy one to mess up and can really delay your refund.

Copies – Did you make a copy of your tax return with all the supporting schedules? If you use PJF Tax we keep a copy of your return on file for you free of charge!

It’s very important that you review your entire return even if you had someone prepare it for you. No one knows your tax situation better than you so make sure you are reviewing your tax professional’s work – ask questions if you don’t understand something. Many of these common errors can delay the processing of your return.

Reach out to us at PJF Tax if you need any help preparing or reviewing your tax return. We can also review your previous year’s returns for errors and amend if necessary.

Do I Really Need to Keep My Tax Return For 7 Years?

The IRS Requirements for Record Keeping

We all have heard that we have to keep our tax returns and pay stubs for X number of years. I’ve heard anywhere from 0 to Forever. (I hope your will doesn’t specify who inherits your lifetime accumulation of tax documents.) Well the IRS actually has very explicit rules on this which you need to follow to avoid the stress other issues that come when you receive an IRS letter or notice in the mail. No need to rely on rules of thumb and hearsay. Here is what the IRS says.

Receipts/Cancelled Checks – These items along with other documents supporting an item of income, deduction, or credit that appears on a tax return must be kept for as long as they could become important in the administration of any IRS revenue law. This generally means until the period of limitation expires for that specific tax return. This is 3 years from the date you filed your return. Keep in mind returns filed early (before the tax deadline) are treated as being filed on the due date (usually April 15th). Conclusion: In general 3 years.

keep-your-taxes

Fraudulent or No Returns – There is no period of limitations when you file a fraudulent return or if you didn’t file a return. A fraudulent return is when you knowingly filed incorrectly. Examples would be leaving off income or taking deductions/credits you are not entitled to. The IRS rule is that for income you should have reported is not reported and is more than 25% of your gross income shown on the return the time to assess is 6 years from when the return is filed. Conclusion: Unlimited – File your taxes and don’t try to defraud the IRS.

Claiming Credits and Refunds  - If you want to claim a credit or refund on your tax return, the period to make the claim is 3 years from the date the original return was filed (or the due date of the return if filed early), or two years from the date the tax was paid, whichever is later. If filing a claim for an overpayment resulting from a bad debt or loss from worthless securities the time to make a claim is 7 years from when the return was due. Conclusion: In general 3 years. 7 if you claim a loss from bad debt or worthless securities.

Health Care Coverage – Starting in tax year 2014 and later you should also keep records related to yours and your family’s health care insurance coverage. This includes records of employer provided coverage, premiums paid, and private coverage documentation. This is to show that you and your family maintained the required minimum essential coverage as now required by Obama Care. If you are exempt from minimum essential coverage you should keep your certificates of exemption that you receive from the marketplace or other documentation to support the claimed exemption on your tax return. This documentation follows the same rules as receipts and cancelled checks so the statute of limitations is 3 years. Conclusion: In general 3 Years.

Small Business Documentation – If you own a business you need to keep all of your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later. Also, there is no method of bookkeeping the IRS requires you to us but however your account for your financial information it must clearly and accurately reflect your gross income and expenses. These records This can get a little complicated so check out this IRS Publication, Employer’s Tax Guide, for more information. Conclusion: In general 4 Years.

That’s it. Those are the IRS rules. You can shred those pay stubs from your first summer job. Once thing to consider is that you may want to keep your records for non-tax purposes. While there is no law your insurance company, banks, or other creditors may want to see this information.

If you have PJF Tax prepare your tax return we keep relevant documents in digital version for the appropriate amount of years. If you want to learn about all the other benefits of using a professional tax preparer.