Don't let basic blunders cost you thousands of dollars in a refund.
Every year, it's the simple stuff that can take a taxpayer down. Common errors cost us millions of dollars in refunds. Here are 7 most-do checkpoints to make sure these slip-ups don't happen to you:
1) Sorry, Wrong Number. One of the most common missteps is entering incorrect numbers on a tax form. We're not talking about a calculation-- just inputting the figures incorrectly. Whether it's a Social Security number or an income amount, botched transfers on the form can cost you.This includes entering the wrong bank account number when requesting a refund to be direct deposited. That refund could actually end up in someone else's account.
Make sure to double-check each number entered on your tax return.
Important tax dates to know:
Important tax dates to know
7 simple tax mistakes you will never make again (after you read this)
January 15, 2016: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date
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April 18, 2016: Individual tax returns are due for the 2015 tax year
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April 18, 2016: Requests for an extension on filling out your taxes must be filed by this date
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April 18, 2016: Those who are self-employed or have first-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date
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April 18, 2016: This date is also the deadline to make a contribution to an IRA account for 2015
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June 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date
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September 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date
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October 17, 2016: 2015 tax returns that received an extension are due by this date
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October 17, 2016: Today is the last chance to recharacterize a traditional IRA that was converted to a Roth IRA during 2015
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January 15, 2017: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date
2) Filing Under the Correct Status. With five different options available under filing status, the most accurate one for your situation may not be easily determined. Each filing status can have an impact on your tax liability. For example, filing under "head of household" is more advantageous than filing "single" if you are single and claiming dependents, because you get a larger standard deduction.
3) Mismatched Names. Newlyweds: congratulations and all that, but pay attention, because typically a wife or partner takes a new last name and the IRS isn't informed. And you get lost in the system. Divorcees: sorry and all that, but the opposite applies as well--you, too, need to notify the Social Security Administration of a name change.
If your name doesn't match the name and Social Security number the IRS has on file, your tax return might get kicked back or the process could slow down.
4) Paying Multiple State Taxes. Don't forget that income earned outside your state must be reported. If, for instance, you work in Pennsylvania but live in New Jersey, a nonresident tax return must be filed to Pennsylvania. Only the money earned in that state needs to be reported and, generally, you do get at least a partial tax credit in your home state. Check with your tax advisor on your state's rules, or consult that state's tax department website .
If you don't file this return, you could face fines, fees, and penalties, in addition to the taxes owed.
5) Staying Current on Obamacare. The biggest tax news of late is the Affordable Care Act. More specifically, you will be responsible for the Shared Responsibility Payment if you do not have health insurance and are not exempt from the law. In 2015, the ACA penalty will be 2% of your household's annual income, or $325per adult and $162.50 per child, whichever total amount is greater, to a maximum of $925.
You need to research the latest changes to the tax code before filing your own taxes or make sure your tax pro is up to date.
6) Missing a Deduction or Tax Credit. While penalties and fees could cost you plenty, missing a deduction or tax break might cause you to pay more than you actually should, or to get a lower refund than what you're entitled to.
RELATED: 10 strangest ways states tax you:
10 Strangest Ways That States Tax You (or Don't)
7 simple tax mistakes you will never make again (after you read this)
To preserve the uniqueness of their island paradise, Hawaii since 2004 has had an "Exceptional Tree" tax allowance. Landowners can deduct up to $3,000 from their income for expenses such as pruning and fertilization for any tree designated as rare, big, old or a combination thereof. That's per tree. Top-bracket earners taxed at the state's highest rate (11 percent) would save $330 via the deduction. The work must be done by a certified arborist, and the deduction can be claimed only every third year. Hawaii has had a list of "Exceptional Trees" since 1975, and there are now estimated to be more than a thousand thus designated.
Maine legislators tax anyone who deals in their official state fruit-blueberries, at the rate of 1.5 cents per pound. The resulting revenues-more than $1.6 million to state coffers in the fiscal year that ended in June 2013-are used to promote the crop and agricultural research.
The state also taxes harvesters and processors of hard-shell clams (known in the state as mahogany quahogs) at $1.25 a bushel, but state revenues for that are much lower.
Alabama is the last in the union to tax a deck of cards as if it were a "vice," like alcohol and tobacco. Taxing decks of cards, associated with gambling, was once fairly common, but most states have since set up separate control boards to regulate liquor and tobacco, and have let the cards slide.
But in Alabama, you'll still pay a 10 cent sales tax on any pack of cards you purchase. Retailers also have to pay $2 to the state each year for the privilege of selling playing cards.
Virginia levies a 50-cent excise tax on every lamb or sheep sold in the state. Both the Maine and Virginia taxes are examples of checkoff programs that collect taxes from an industry to fund promotional campaigns for the products. National commodity checkoff programs, authorized by the U.S. Department of Agriculture, have brought you campaigns such as "Beef: It's What's for Dinner" and "Got Milk?" But the Virginia program is extremely modest by comparison, having collected only $9,000 in fiscal year 2013. The funds go to the Virginia Sheep Industry Board, which spends them largely on predator control.
In 2013, in part to meet federal pollution-control mandates, Maryland legislators enacted fees on property owners in Baltimore and nine other Maryland counties, aimed at curbing storm water runoff. The fees were meant to fund programs to improve the water quality of the Chesapeake Bay, the largest marine estuary in the U.S. Sounds simple enough, but the way Maryland legislators wrote the law has led to an angry backlash in some corners against this so-called “rain tax.” One way localities calculate the tax is by measuring how much of a landowner’s tract is "impervious" to precipitation seeping into the ground. So the more you've developed it with buildings, driveways, tennis courts and the like, the less it will absorb and the more you pay. That's how the tax is being implemented (through aerial and satellite photos) in Montgomery County, a heavily developed suburb of Washington, and many landowners are up in arms. New Maryland Gov. Larry Hogan, a Republican, campaigned against this tax in his winning 2014 campaign and has introduced legislation to repeal it, though it’s not clear that will fly with Democratic state legislators. Money still needs to be raised to satisfy the federal pollution mandates, but the methods may change.
Kansas is among a bevy of jurisdictions that allows sale of lower-alcohol beer (the term of art is “cereal malt beverage”) in convenience and grocery stores. But Kansas also taxes “3.2” beer differently -- and there lies the rub. At a liquor store, all products, including, say, a conventional six-pack of Budweiser (with 5 percent alcohol by volume), are taxed at a special rate of 8 percent. At the convenience store down the street, however, ordinary sales tax is levied on the lower-alcohol, cereal malt beverage bottle of Bud. That often ends up being more than the 8 percent alcohol tax. In Pomona, Kansas, for example, the effective rate on the weaker beer would be 9.7 percent. Go figure.
When it comes to taxation, the rule is generally the stronger the booze, the higher the tax (that's why Kansas's beer tax scheme is an anomaly). California follows that curve, but at 100 proof, you better be ready to pay through the nose. Distilled spirits are taxed at $3.30 a gallon if below 100 proof, or 50 percent alcohol. Go over that, like with Bacardi 151, and the tax doubles to $6.60. Maryland also notes the 100 proof point, but it only adds 1.5 cents per proof, per gallon to the relatively modest liquor tax of $1.50 per gallon, taking the Bacardi 151 to $2.27 per gallon.
Entertainment venues pay a business tax to Nevada ranging from 5 percent to 10 percent on admissions fees (and food, drink and merchandise sales) whenever there’s live entertainment going on. There are exemptions, however, including this one, for businesses that provide "instrumental or vocal music, which may or may not be supplemented with commentary by the musicians, in a restaurant, lounge or similar area if such music does not routinely rise to the volume that interferes with casual conversation and if such music would not generally cause patrons to watch as well as listen." So your piano player can play “Feelings” softly and even crack a few jokes, tax-free, for your business. Just make sure they're not funny enough to attract attention.
Want to own a plush or fuel-thirsty ride? That’ll cost you extra in New Jersey. Cars that cost $45,000 or more or have a combined EPA fuel-mileage average of 19 or below pay an additional 0.4 percent on top of New Jersey’s 7 percent sales tax.
In New Mexico, making it to 100 years has a payoff beyond the chance that Willard Scott will wish you a happy birthday: You don’t have to pay state income tax anymore. If you’ve been physically present in the state for at least six months and a resident of the state on the last day of the year, and you’re not someone’s dependent, you’re eligible. You’ll still need to file, and there are some complications if you’re married and your spouse doesn’t qualify.
If you don't understand taxes, find an advisor who does.
7) Forgetting to Sign the Forms. Finally, it's a way-too-common oversight to forget to sign on the bottom line. While this may not penalize you initially, it will cause a delay in receiving any anticipated refund. For taxpayers who've allocated their refund money to pay bills, the delay might cost you in late charges. And if you owe taxes and wait until the deadline to file, failing to sign the return might result in a late fee and penalty when the IRS kicks it back for signature, and April 18th has passed. As far as the IRS is concerned, you haven't filed.
Don't let silly mistakes take money out of your pocket. Taking 5 minutes to double-check your return might mean more dollars in your bank account when you need it.
The IRS allows you to claim a deduction for the donations you make to qualified organizations. These organizations include more than just charities and will include any school district program that does not operate for profit and is solely supported by state and local governments.
The IRS has reintroduced Form 1099-NEC as the new way to report self-employment income instead of Form 1099-MISC as traditionally had been used. This was done to help clarify the separate filing deadlines on Form 1099-MISC and the new 1099-NEC form will be used starting with the 2020 tax year.
Not all capital gains are treated equally. The tax rate can vary dramatically between short-term and long-term gains. Generating gains in a retirement account, such as a 401(k) plan or an IRA, can also affect your tax rate.