Common Tax Mistakes

Common Tax Mistakes

With tax season rolling up around the corner, it is important that you are prepared and ready to organize and file your taxes. Make sure you don’t find yourself making these common tax mistakes:

1. Not updating accountants on personal changes – Many individuals have
accountants and those accountants have the individuals’ information as was
given to them previously. This information includes home addresses and
occupation. Tax payers should make sure their accountant has the
information updated each year.

2. Differentiating between reportable income – For those who have
retirement accounts or certain work functions, your gross for work may be
different in Box 1 of your W-2 versus Box 3. Be very cognizant when
entering the correct gross income for tax purposes.

3. Not recording gambling winnings – Gambling winnings are taxable
income and should be reported. Of course, gambling losses are also
reportable up to the amount of winnings on Schedule A for itemization
purposes.

4. Forgetting to take sales tax deductions in state with sales tax
and Big ticket items. For states with state income tax, tax payers should
compare and see which deduction is higher for itemize deduction purposes.
For states with no state income tax, tax payers should make sure they elect
to take the sales tax deduction. Additionally, large purchase items such
as cars and boats should also be included when electing to take the sales
tax deduction.

5. Auto expense deductions – For businesses, there are two forms of auto
expense deductions, one is using the mileage and the other is using the
actual expenses paid (or incurred). A tax payer can only choose one, not
both. And in the first year of the deduction for the automobile, if they
choose auto expenses they can use this method of deduction for the life of
that automobile.

6. Deductions for parents – Many tax payers are now providing the
majority of the support for the elderly parents. If the dependency test is
met, the parents should be claimed on the tax payer’s tax return as
dependents.

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2016-04-12T02:11:02+00:00 February 12th, 2014|Blogs|