Save Money by Reducing Tax Payer Mistakes
It’s tax season! We all know how much fun this time of the year can be. Check out the top four mistakes tax payers make and how to avoid them.
- Bad Math: Mistakes in arithmetic or transferring figures from one schedule to another result in an immediate correction notice from the IRS. If there is a tax deficiency, you will automatically receive a bill for the amount. If you overpaid, the excess is applied to future taxes, credited or refunded at your request.
- Forgetting About Interest and Dividends: Interest and dividend payments are reported to the IRS by banks, brokerage houses and other financial intuitions and are cross-checked in about 96% of the cases. As a result of this cross-checking, the IRS sends out notices for taxes and interest on overdue taxes for income and other payments that were not reported.
- Not Tracking Investment ‘Basis’: A basis is the original value of your investments. When you sell these funds, your gain will be the difference between what you receive on the sale and your “basis”. The basis actually increases once any financial gains you reinvested are taxed. If you reinvested taxable gains from these funds, those gains are added to your basis to reduce your gain. To make sure you have the right basis check with your Fund Company or broker.
- Getting Married: High-income earners who marry will lose write-offs for personal exemptions faster than their single counterparts. Marriage may also wipe out potential IRA deductions. Of course, if only one partner is employed, marriage would provide tax savings.
For more tax payer mistakes please read Unlucky 7: The Top Tax Payer Mistakes.
posted by Cara at
1:28 PM
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