It would be generous to describe tax forms as daunting. Even the 1040-EZ looks significantly more complicated than it actually is. And, while you’re worrying about exemptions and deductions, you might forget to do something as simple as sign your name. That’s why the folks at USA Today put together this list of 10 common mistakes you should be aware of when filing.
1. Incorrect Social Security numbers:
-Get the SSN wrong or omit it for any of your dependents and the IRS might disallow the exemption, which could mean a significant amount of money. Also, if you got married and changed your name, make sure you notify the Social Security Administration before you file your taxes.
2. Incorrect bank account information:
This should be filed under “triple/quadruple check before filing.” If you’re requesting direct deposit on your return, one incorrect number in the account or routing number could wreak havoc on you getting your return.
3. Overlooking charitable contributions:
Go through credit card and bank statements to make sure you’ve listed all charitable donations for the year. And if you made a contribution to earthquake relief in Haiti between Jan. 12 and Feb. 28 of 2010, you can include that deduction on this year’s taxes.
4. Missing deductions on tax breaks:
Even if you claim the standard deduction, you could be eligible for these tax breaks–
â€¢Taxes on the purchase of a new car. You can deduct state and local taxes paid for a new vehicle purchased after Feb. 16, 2009, and before Jan. 1, 2010. You can deduct taxes on up to $49,500 of the purchase.
â€¢State and local property taxes. This tax break primarily helps homeowners who have paid off their homes or don’t have enough mortgage interest to itemize. You can increase your standard deduction by up to $500, or $1,000 if you’re married, to cover your property taxes. This deduction isn’t limited to your residence.
5. Missing the Making Work Pay credit:
If you received the $400 or $800 Making Work Pay credit last year, you will still need to claim the credit. Otherwise, your refund could be delayed.
6. Not reporting the stimulus payment:
As part of last year’s stimulus package, Social Security beneficiaries received a $250 one-time Economic Recovery Payment. This payment isn’t taxable. However, if you had earned income last year, you may have also received a Making Work Pay credit. In that case, you’re supposed to reduce your credit by the amount of your recovery payment. Failure to do this could delay your refund.
7. Misunderstanding medical expenses:
You can only deduct the the amount of unreimbursed medical expenses that exceeds 7.5% of your adjusted gross income. So, for example, if your adjusted gross income comes out to $50K, you can only begin deducting unreimbursed medical expenses after they total at least $3,750. But it might be worth looking at, considering the high cost of… well, everything. Eligible expenses include deductibles, co-payments, unreimbursed dental costs, eyeglasses and transportation costs (ex: mileage and parking when you go to the doctor).
8. Paying unemployment benefits taxes:
For 2009, up to $2,400 in unemployment benefits are tax-free, so you’ll need to subtract that amount from your total benefits when calculating your taxable income.
9. Thinking you’re late for 2009 savings:
“If you qualify, you can still make a deductible contribution to your 2009 individual retirement account. Eligible taxpayers can reduce their 2009 taxable income by up to $5,000, or $6,000 if they’re 50 or older. The deadline for 2009 IRA contributions is April 15.
“For 2009, workers who are covered by an employer-provided 401(k) plan or pension must have modified adjusted gross income of $55,000 or less to deduct the full IRA contribution. Those with MAGI of between $55,000 and $65,000 can deduct a reduced amount. If your MAGI exceeds $65,000, and you’re covered by a retirement plan, you can’t deduct your IRA contribution. For married couples who are covered by a retirement plan at work, the deduction phases out between $89,000 and $109,000.
“If you’re not covered by a retirement plan at work, you can deduct the full contribution, as long as you earned at least the amount of your contribution. The same goes for married couples when neither spouse is covered by a retirement plan. If your spouse is covered by a retirement plan but you’re not, you can deduct a full contribution to your IRA as long as your combined MAGI is $166,000 or less. If your MAGI is between $166,000 and $176,000, you can deduct a partial contribution.”
10. Forgetting to sign your return:
The IRS says an unsigned return is invalid. Remember: If your return was prepared by someone else, you’re still required to sign it, as should the preparer.
What are some mistakes you’ve made? What do you always find confusing on the tax forms every year?