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Smart Money: Five Major Tax Mistakes to Avoid

1:33 PM, Jan 23, 2014   |    comments
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#1 - USING AN UNETHICAL OR INCOMPETENT PREPARER
• Taxpayers are responsible for the return they file even if someone else prepares the return!
• Most preparers are honest and competent, but some unscrupulous preparers take advantage of people each year.
• Check for professional credentials such as CPA, attorney or enrolled agent and research his or her history.
• Ask the preparer for his or her Preparer Tax Identification Number. All paid preparers must have one.
• Avoid preparers who claim exaggerated refunds or charge a fee that is contingent on your tax refund.
• Ensure that the preparer signs the return and includes his or her Preparer Tax Identification Number.
• Never sign a blank tax return.
• Ensure that your tax preparer will be available after April 15 for issues that arise after the filing deadline.
• Be very skeptical if the results of your tax return seem too good to be true.

#2 - CLERICAL AND MATH ERRORS
• Numerical errors and incorrect Social Security numbers are the top two problems errors identified by the IRS.
• Ensure that Social Security numbers are accurate for taxpayers and dependents. Triple check these numbers! Also, your return will also be rejected by the IRS if a dependent has already been claimed by someone else.
• Math errors are another major reason that the IRS sends notices regarding tax returns.
• Using the incorrect tax table or interpreting the tax tables incorrectly will cause errors in your tax computations.
• We recommend filing electronically using a preparer, a reputable software or via the IRS (www.irs.gov/freefile).

#3 - DIRECT DEPOSIT ERRORS
• Triple check the routing number and bank account number for direct deposit of your refund.
• Incorrect bank information will create a significant delay in the receipt of your tax refund.

#4 - IGNORING AMT
• The Alternative Minimum Tax (AMT) was originally designed to ensure that people with substantial economic income pay a certain level of tax regardless of certain deductions that are available to them.
• Because the AMT exemption is not indexed to inflation, this tax that was originally intended to affect a small number of U.S. households now affects millions of taxpayers.
• The complexity of the AMT is another reason to seek a professional preparer or a reputable software solution.

#5 - DID THE IRS RECEIVE YOUR TAX RETURN?
• Ensure that you file by the due date (April 15) or file a request for a six-month extension.
• Be sure that you sign and date your return. If you are married, your spouse must also sign the return. An unsigned return is the same as a non-filed return.
• Include sufficient postage. It is wise to have the post office weigh your envelope to ensure proper postage.
• Consider sending your return via certified mail with a return receipt requested if you file a paper return.
• Double check to ensure that you are sending your return to the proper address listed in the tax return instructions.
• Did you attach required documentation such as Forms W-2?
• Strongly consider electronic filing to eliminate many of the concerns involved with filing paper returns.
• Don't forget to file your state and city returns when you file your federal tax return.

Courtesy: www.hungerfordnichols.com
616-949-3200

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