Don’t Make These Mistakes with Your Tax Return
Filed under: Taxes and Planning
According to a study by the Government Accountability Office, over 50 percent of tax returns contained errors last year. Filing your taxes is hard enough without worrying about an audit! But that’s exactly what could happen if you make one of these common mistakes.
Watch your charitable contributions deductions. First of all, only contributions to a qualified charity count as a deduction on your taxes. Second, don’t estimate your contributions. Keep all receipts for contributions, and enter the precise amount on your tax return. Finally, if you receive any goods or services in exchange for your contribution – say, for example, you won an item at a charity auction – then you can only claim the amount of your contribution that was in excess of the value of the item. If you’re audited, be ready to prove your charitable contributions.
Don’t forget your state income tax refund. If you received a state income tax refund last year, don’t forget to add that amount to your overall taxable income for the year. A lot of people forget this simple rule! For a few people, their state tax refund can even change their income bracket.
Remember to claim your gambling winnings. If you win money at a casino, they should give you a special statement to report the winnings on your federal income tax return. You don’t want to get caught failing to report this income.
Real estate taxes. If you bought a home during the year, remember that you probably pre-paid some taxes at closing. Don’t forget to count this money when you calculate your real estate tax deduction.
Don’t rush. Most tax filing errors are mistakes, usually made when someone is rushing to finish their tax return before the April 15 deadline. It’s better to file for an extension than rush, make mistakes, and risk an audit. File for 4868 if you need more time, and the IRS will grant you a six-month extension (until October 15) to file your tax return. Just remember not to procrastinate, or you’ll find yourself rushing to finish the return in October!