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Money Management
Simple Tax Trip-Ups You Can Avoid
Each year, in their haste to meet the filing deadline, millions of taxpayers make
mistakes that can affect their tax bills, delay the processing of their returns, and/or attract the attention of
the IRS. The following checklist of tax trip-ups, provided by the New Jersey Society of Certified Public Accountants
(NJSCPA), can help you avoid these all too common errors.
Recheck your math. If you should
find a mistake, determine whether the change affects figures appearing elsewhere on your return. Also, be sure
that you have not made errors in transferring numbers from one schedule to another.
Verify that you have chosen the best filing status for your situation. For most married couples, filing jointly is usually best, but sometimes it pays to file
separately, especially when one spouse has a significantly lower income and more deductions. If you are single
and support a dependent, find out whether you qualify for head of household status, which offers a more favorable
rate than filing single.
Make the most of dependency exemptions.
Remember that you may be able to claim exemptions, not only for your children, but also for other qualified relatives
you help to support. To claim an exemption, generally you must contribute more than half of the dependent's support.
If you contribute more than 10 percent and together with others contribute more than half of the total support,
one person may claim the dependent. In some instances, the dependent must also have income below certain thresholds.
A citizenship or residency test also applies. Talk to your CPA for more information.
Use the correct form. Just because
you have used Form 1040EZ or Form 1040A in the past, don't automatically assume you should continue to do so. You
may miss out on tax-saving deductions or credits that can be claimed only on Form 1040.
Complete and attach all required tax schedules and forms. Refer to the "Attachment Sequence Number" in the upper right corner of each
schedule and form. Include your Social Security number on each page in case the forms become separated.
Verify that your Form W-2s and 1099s are correct.
If they are not, correct them as soon as possible so that the IRS's records agree with the amounts you have calculated
on your return.
Don't pay too much Social Security tax.
If you worked at two or more jobs in 2000 and your total earnings from all jobs exceeded $76,200, you may have
overpaid your Social Security taxes. Follow the instructions included with your Form 1040 to claim a credit for
excess FICA taxes.
Include Social Security numbers for all dependents who were born on or
before November 30th of the current tax year. Also, if you are taking
the dependent care tax credit, you need to provide the caregiver's taxpayer identification number or Social Security
number as well.
Don't overlook carry-overs. Take
a look at last year's tax return to see if you had any items that carry over to this year, such as charitable deductions
or capital losses that exceeded the amount you were able to deduct on your 1999 return. For example, in general
you can't claim more than $3,000 in investment losses in a single year, but you can carry the excess amount over
into future years.
Use the correct tax tables. Be
sure that the tax figure you use is from the line and column applicable to your filing status.
Verify that you and your spouse, if filing jointly, have signed and dated
your return. Make your check payable to the U.S. Treasury and write your
name, address, phone number, Social Security number and the tax year for which the check represents payment. Make
copies of everything before sending your return to the IRS by registered or certified mail. To speed processing
of your return, use the mailing label and bar-coded envelope included in your package. Then file all supporting
documents so you can easily produce them in the event of an audit.
File for an extension if you need more time to complete your tax return
carefully. Rather than rushing off a return that may have errors, you
can request an automatic extension simply by submitting Form 4868, Application for Automatic Extension of Time
to File U.S. Individual Income Tax Return, by April 16, 2001. Remember, however, that the extension applies to
completing the return only; any tax due must be paid by April 16.
CPAs say you can save yourself time and money by checking your return before mailing it. If you have questions
concerning any of the items on your return, consult a CPA for advice.
Published: April 2, 2001
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Money Management is a weekly column on personal
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