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Today''s featured article comes from the wisdomjournal.com and offers some very helpful and informative tax preparation tips for 2011. You should expect to receive all of your tax documents from your employer, charity donations, 1099 contractor tax forms etc by early/mid February. Have you ever been audited? What did you learn from the audit? We would love to hear your thoughts. Tweet about it @pawng



It’s easy to make a lot of these tax mistakes. We’re busy and our lives are taxing enough already (pardon the pun). When tax time rolls around, we can get in a big hurry to get it over with and in our rush, make a few mistakes. Here’s a list you can reference to make sure you don’t delay your refund or wind up paying penalties, interest, or fees.

 

1. Failing to report forgiven debt as income. Companies that cancel debt report it to the IRS on Form 1099-C and you’ll have to pay taxes on it.

 

2. Failing to report all sources of income. The lucky break that put a little jingle in your pocket or a new iPad in your mailbox is taxable as income too. Forgotten income trips up a lot of people.

 

3. Falling for a tax break scam. Just because some guy on the radio (or even in a blog article) says you can deduct something doesn’t mean it’s so, check and make sure.

 

4. Failing to understand IRA rules. They are complicated! Get sound advice from a respected expert when it comes to your IRA.

 

5. Failing to use the right status. If you’re married and filing separately, make sure you don’t check married filing jointly.

 

6. Failing to report debt paid by an employer. If your employer paid your student loan, that’s income according to the IRS.

 

7. Falling for the unethical tax preparer. You don’t want a tax preparer that is willing to push the envelope.

 

8. Failing to file altogether. Kind of the most basic mistake, I know, but tens of thousands of people “forget” to file their taxes. The statute of limitations expires after three years if you’re owed a refund, but NEVER expires if you owe.

 

9. Failing to realize that one spouse can be forced to pay another’s tax bill. If one spouse owes a bill for the past year and the other is due a refund, count on the IRS taking the refund to pay the outstanding bill.

 

10. Failing to read your entire return to check for accuracy. It is ultimately up to you to make certain everything is accurate. Double and triple check your return. 

 

11. Failing to file IRS Form 8822 (change of address) when you move. You’re still liable for any notices sent to your old address.

 

12. Failing to write your name and SSN on each form and schedule you send the IRS. If one page gets detached, it can be easily put with the correct return if your name and SSN is on it.

 

13. Failing to have written documentation for your charitable donations. The IRS is keen on this one. Any legitimate charity will willingly give you a receipt. If nothing else, your cancelled check may suffice.

 

14. Failing to maintain accurate records for your travel and automobile expenses. The IRS wants to see daily entries for your mileage and travel expenses. Don’t just list “500 miles – business” and expect that you’ll survive an audit.

 

15. Failing to file IRS Form 8829 if you’re claiming part of your home as a home office deduction. This deduction is highly audit-flagging anyway so make sure you have the proper documentation.

 

16. Failing to have a written agreement when you and your spouse have legally separated. Until you’re legally divorced, the money you send to your spouse isn’t deductible because it technically isn’t alimony.

 

17. Failing to deduct job search costs. The cost associated with searching for a job within your industry can be deductible, including copying your resume, travel for interviews, and The Inner View of Your Interview.

 

18. Falling for the refund anticipation loan. Waiting just a few days to get your refund will save you an unbelievable amount of fees that come with refund anticipation loans.

 

19. Falling for the ease of paying with a credit card. It’s easy to be sure, but even if you pay it off immediately, you’ll pay the 2.5 percent fee charged by the credit card company … cause the IRS certainly isn’t going to pay it.

 

20. Failing to correctly handle the “Making Work Pay” tax credit. This credit ($400 for individuals; $800 for couples) is filled with quirks sure to trip up taxpayers and tax preparers alike.

 

21. Failing to accurately calculate the Earned Income Tax Credit (EITC). The EITC gives low income families and individuals a tax credit for the dependents they support, but many people incorrectly calculate the credit they’re owed.

 

22. Failing to check your math! Another no-brainer, but the IRS gets thousands of returns each year that transpose numbers or that just don’t add up.

 

23. Failing to use the correct tax table when calculating your taxes. If you’re still preparing your returns by hand, make certain you use the correct table. If you use Turbo Tax or H&R Block, you shouldn’t have this problem.

 

24. Failing to send in the proper documentation. Many returns will require documentation be sent to the tax authorities. Make sure you sent what’s needed EXACTLY.

 

25. Failing to sign and date your return. Another rookie mistake.