The April 15th deadline is quickly approaching. For those who have yet to file, this can be an overwhelming time. When rushing to get taxes prepared, sometimes things go wrong. Before you sit down to prepare your taxes, relax, and take a few minutes to review these eight common yet lesser-known tax mistakes.
Not claiming all dependents. Are you caring for a parent or supporting a friend? If so, he or she may be claimed as a dependent. The same is true for your kids in college. On your 2012 tax return, you can claim a $3,800 dependent exemption deduction per dependent. The exemption reduces the portion of your income subject to federal tax—just be sure no one else is claiming the same dependents as you. For example, you and your sibling can’t both claim your parent as a dependent.
Not comparing this year’s return to last year’s. Take a look at your completed return and paperwork from last year. It might remind you of a deduction you took in 2011 and you are eligible for in 2012.
Overlooking irregular deductions. There are a number of unusual expenses that can be deducted. For instance, you may be able to deduct job-related expenses. Some credit card companies and banks itemize a year’s worth of expenditures for you and enable you to sort them by category online. If you use personal finance software, spend some time going through all the categories to ensure you’re not missing out on a deduction.
Not filing electronically. Doing your taxes with software and e-filing reduces common mistakes, as many common errors are corrected by computer software. When you e-file with direct deposit, you also get your tax refund faster than paper filing.
Not disclosing all your income. In the last-minute rush, taxpayers often forget important tax documents. Make sure you have important tax forms like W-2s and 1099s in front of you when you sit down to prepare your taxes. If you have multiple employers, or if a W2 or 1099 goes missing, you may end up accidentally forgetting to disclose all your income.
Forgetting to sign. It sounds basic, but not everyone remembers to sign their tax return and their check to Uncle Sam (if they owe money). Check to make sure you’ve signed in the appropriate places; otherwise, you may face delays receiving your refund.
Wasting your refund. If you’re due a tax refund, plan ahead for what you’ll do with it before it arrives. Use your windfall to pay down debt. Invest it in tax-deferred retirement accounts. Put it in a savings account for the inevitable rainy day. Use it to take a class to help advance your career or take a nice vacation. The worst thing you can do is spend your refund on something you’ll forget about a month or two later.
Lisa Greene-Lewis, Lead CPA, American Tax & Financial Center at TurboTax, has more than 15 years of experience in tax preparation, including positions as a public auditor, controller, and operations manager. For up-to-date tax tips and tax news, go to the TurboTax Blog.