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Don’t make these 10 common tax return filing errors

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in Small Business Tax,Small Business Tax Deduction Strategies

Nobody’s perfect, but any mistakes you make on your tax return can come back to haunt you in penalties, interest and missed opportunities. What are the 10 most common errors? Here’s what the tax pros say:

1. Fuzzy math: By far the most common tax return mistake is faulty math: numbers transposed, omitted or added/subtracted incorrectly. And entering a math error on other parts of your return can have a domino effect. Even if you use tax software, you’re not immune: You may have entered the wrong numbers in the first place.

Tip: Check and then double-check all entries.

2. Incorrect ID numbers: These nine-digit identifiers are the “passwords” to your return. It’s easy to write down the wrong identification number for you or your spouse. And don’t forget to check ID numbers for dependents.

Tip: A mistake here could delay your refund or, even worse, cost you a credit or a deduction.

3. Discarded IRS labels: If you’re still filling out a paper return, use the IRS’ pre-printed label with your name and address on it. This helps IRS employees “sort through the wreckage.” Even if the label is wrong—for example, if you moved recently—correct it by hand. Similarly, use the proper address label for refunds or payments.

Tip: Using the pre-addressed label also ensures that your return reaches the proper processing site.

4. Wrong 1040 forms: You can use one of three Form 1040s. Most of our readers use the longer 1040, but other filers—perhaps your children—can get by with the simpler 1040A or 1040-EZ. But the long Form 1040 includes more tax goodies.

Tip: You don’t have to fill out every line on the form, just those that apply to you.

5. Omitted forms: Remember to include all W-2 forms (Copy B) to avoid delays in processing your return. Similarly, if you received a Form1099-R reporting federal income tax withheld, you must mail Copy B of that form, too. Other forms required for extra tax deductions or credits are often omitted.

Tip: Put the forms in the proper order following your 1040. Each form has an attachment sequence number in the upper right corner.

6. Unreported investment income: Based on your Social Security number, the IRS can keep tabs on your annual interest and dividend income. The IRS may cross-check the information it receives on 1099s against the income you’ve reported on Form 1040.

Tip: If you receive a bunch of forms, it’s easy to misplace one or inadvertently omit it. Keep organized to avoid any oversights.

7. Tax table entries: Watch out for the small print in the tax tables. You could easily misread the figures or use the wrong column for your tax filing status. Even worse: You might use the wrong tax table if you’re not careful.

Tip: Capital gains and losses require a separate computation on Schedule D. Work through a “sample” before you actually enter the figures.

8. Payment problems: If you owe a tax payment, make the check payable to the U.S. Treasury, not the IRS. Be sure you sign the check. Then simply include it in the envelope.

Tip: Don’t staple the check to your Form 1040. When an IRS employee pulls it off, it could rip or obliterate other items.

9. Missing signature: It’s last but not least: Don’t forget to sign your tax return. The IRS won’t process a tax return if it lacks a signature. This won’t hurt as much if you filed early, but it could cost procrastinators a late fee.

Tip: Before you seal the envelope, take one last look at the entire return.

10. Tardiness: Unless you’re stranded on a desert island somewhere, you have no excuse for missing the tax filing deadline. The late-filing penalty is generally 4.5% of the tax owed for each month, or part of a month, up to five months. If your return is more than 60 days late, the minimum penalty for late filing is the lesser of $100 or100% of the tax owed.

Tip: If you need more time, file Form 4868 for an automatic six-month extension (but this is not an extension to pay tax). Find Form 4868 at www.irs.gov/pub/irs-pdf/f4868.pdf.

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