Last year, the IRS reported 2.7 million errors made by 22 million taxpayers on 2011 returns. Although that’s considerably lower than the 6.6 million errors made the previous year, mistakes are bound to happen. Just one small slipup could cost you, resulting in a larger tax bill, smaller refund or delayed return.
This year, take some time to double—or even triple—check your work! As you calculate your returns, consider each and every home deduction and credit, compare numbers, make sure everything is spelled correctly and in the right spot and keep an eye out for these common mistakes:
Misjudging the home office tax deduction.
Recent changes in how you calculate your home office deduction means you no longer claim the actual costs associated with your office—instead, your deduction is equal to $5 times the square footage of your home office space. Your total office space, however, is limited to 300 square feet (or $1,500).
This new simplified method of calculating your home office deduction is undoubtedly easier than before, but keep in mind: if your income if greater than your expenses, you can take the full deduction; if your expenses are greater, you can only take part of the deduction.
Entering the wrong numbers for direct deposit.
Yes, having your refund directly deposited into your bank account is a quicker, more convenient way for you to receive the money you deserve, but the more numbers you have to enter, the more chances you have to enter them incorrectly!
Although the direct deposit form isn’t difficult to complete, if you enter the wrong account number, your refund could be sent back to the IRS—or worse, end up in someone else’s account! In the event that your return does get misplaced, unfortunately, the IRS doesn’t have a procedure that replaces lost funds transferred electronically.
Incorrectly filing energy tax credits.
From purchasing new energy-efficient windows and doors to installing solar panels, energy improvements have the potential to benefit both the environment and your wallet—in fact, making such improvements can mean a 10% tax credit!
But keep in mind, this is a lifetime credit. If you’ve claimed this deduction in recent years, you can’t claim it again. For more information, see Form 5695; this form covers systems eligible for tax credits through 2016. Read the instructions carefully!
Failing to track home-related expenses.
Did you know: most people forget to track money spent on home improvements? Filing away documents and receipts as you go can help you accurately calculate what you’ve shelled out on one of your biggest investments.
The worst thing you can do is guesstimate how much you’ve spent on improvements to your home. In the event of an audit, this will leave you scrambling for your records and receipts—and could potentially result in a fine!
Waiting until the last minute to file.
This is one of the worst things you can do!
Getting an early start on your taxes will help both you and your accountant focus on compliance—not to mention, you’ll be able to do thorough research on what deductions and credits you may qualify for.
If, for some reason, you wait too long to get started and you feel you won’t be able to accurately file on time, it’s completely appropriate to ask the IRS for an extension!
Did you know: our experts can handle any and all of your tax concerns? For a FREE tax consultation, call today! (631) 921-6894.
Have a question or certain topic you’d like to see addressed in our next blog post? Just leave a comment, or e-mail us at info@beatonaccounting.com.