Boelman Shaw Capital Partners in Des Moines wants to help you avoid unnecessary tax issues this year. Steer clear of these common tax mistakes when preparing your 2013 return.
The IRS has estimated that it takes the average taxpayer 22 hours to complete a 1040 return. Failing to organize your documents will make this process even longer than it needs to be. As you incur deductible expenses, keep receipts in a dedicated file. You should receive all of the forms you need, including tax forms from employers and banking institutions, by the end of January. Organize everything as you receive it, and you will be ready to hit the ground running when you start filling out your forms.
Waiting Until the Last Minute
It makes sense to start doing your taxes as soon as you have the necessary forms. W-2s and 1099s should be available the end of January. If you are due a refund, you will receive it faster by submitting your tax return early. Even if you owe taxes, you can submit your form before the deadline but wait to pay the balance due until April 15. Knowing how much you owe can help you plan to have the money available when it is due. Having your taxes done early also helps with many processes that require financial documentation, such as applying for a loan or obtaining student financial aid.
You can avoid most math errors by filing your form electronically rather than using paper and pencil. The IRS provides free electronic filing using brand-name software through its Free File program. Always double check your return before you submit it to make sure that anything you have to do yourself is done correctly. If your name or family status has changed, make sure that your 2013 return reflects your current information.
Be careful to include correct Social Security numbers for everyone included on your return. Every year, the IRS receives thousands of returns with missing or incorrect Social Security numbers. This will unnecessarily hinder the processing of your return.
Failing to Report All Sources of Income
If you know that your received income from a company this year and do not receive a W-2 or 1099 from them, contact the company. Failing to report income makes it seem as though you are trying to hide something and may make the IRS take a closer look. Failing to report all of your income will also cause you to miscalculate your refund or tax due and may subject you to penalties.
Taking Too Many or Too Few Business Deductions
The IRS provides detailed information on what types of business deductions are allowed. Check out their “Deducting Business Expenses” page to make sure you are claiming all of the deductions to which you are entitled but not over claiming and putting yourself at risk for underpayment penalties.
Insufficiently Tracking or Documenting Charitable Donations
Save documentation of every charitable donation you make throughout the year, and keep it in a file dedicated to tax deductions. This way, all of the documentation you need is organized when you sit down to do your taxes. Make sure that every donation you deduct was made to a qualified charity. Contributions to political organizations and individuals are not deductible. If your total deduction for charitable contributions exceeds $500, you must also file Form 8283 with your tax return. Remember that if you receive any goods or services in exchange for a charitable contribution, you must subtract the fair market value of what you received from the total value of your contribution to calculate the deductible amount.
Get advice from a knowledgeable professional!
If you file anything other than a very simple and straightforward tax return, it is wise to get the help of a tax professional. Boelman Shaw Capital Partners requires all of our tax preparers to take continuing education to keep up to date on changing tax law. We can help you claim all of the tax benefit to which you are entitled and avoid claiming more than you should. Avoid unnecessary tax issues by watching out for common mistakes and getting professional advice on any questions that arise.
Material discussed herewith is meant for general illustration and/or informational purposes only, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.