1) Filing Late: Taxpayers might want to wait a few weeks after the deadline before filing, that decision could cost them. The IRS charges interest (compounded daily) at an annual rate equivalent to the federal short-term rate plus 3 percent on any unpaid taxes, starting from when payment is due until the payment is received. In addition to charging interest, the IRS also charges a penalty for filing late (5 percent of the amount owed for each month or partial month the payment is late, up to a total of 25 percent). Depending on the amount someone owes and how long he or she waits to pay, interest and penalties can mount up in a hurry. Even if you don't have the funds to pay your tax liability at the moment, the IRS encourages everyone to file something. Penalties are much less sever if you:
2) Last Minute: When we rush we make errors. If you have tax liability do not wait to last minute! Also, filing electronically will save time and cost less in penalties if errors are found. Common errors are:
3) Mathematical errors: Preparing your returns electronically can help, since tax software will do most of the math. But operator errors won't be caught by it.
8) Incorrect Forms: In effort to save money the tax payers may use a simpler tax form than the one applicable to their situation. In some case this may cost in additional deductions. What if using the correct form could save hundreds of dollars?
4) Not knowing the latest IRS rules:
Not being familiar with the latest tax news may cost you money. It’s good to check the IRS’s latest news on their web page: IRS.govSome of the 2012 Updates:
5) Being too Green? The IRS has several guidelines to help you know how long to keep your returns, in some cases it may be as long as six years before the statute of limitations runs out. If you are eager to clear out the clutter in your home you should hold on to the return in question.
6) Fraudulent Tax Reporting: Faking your death to avoid taxes has been tried and has failed in a number of interesting cases.
For Tax Payer Protection the IRS has issued a Phishing warning related to emails that are sent to taxpayers requesting various sensitive information. If you receive a suspicious email you can confirm its legitimacy by emailing the IRS’s phishing division email@example.com
7) Missing out on Money due to you: l Heard of a recent CA lottery winner who lost her lottery ticket in the car and hasn’t claimed it for months? ($23 million!!!)
With your tax return you may be doing the same. If you are not aware of the latest tax rules you may be foregoing thousands in valuable deductions!
9) Determine your Correct Fining Status: What was your status as of December 31?
10) Incorrect Adjusted Gross Income (AIG): To file your returns electronically you have to use your prior year's AGI. It should NOT BE:
For additional Information on common errors visit IRS.gov's Tax Topics.