Common Tax filing mistakes - Series 1 of 2

The most common error on tax returns is mathematical.  There are one of the most easily detected by government agencies and can reduce your tax refund or result in you owing more tax than you thought.

Even though you can have a refund directly deposited into multiple bank accounts, it is not necessarily the best option.  The more numbers you enter on a tax form, the more chances you have to enter them incorrectly. A wrong account or routing number could cause you to lose your refund entirely.  At present there is no IRS procedure for replacing lost electronically transferred funds.

Do no forget to report a required form.  If you had a side job this year, for amounts $600 or more you should receive a Form 1099-MISC detailing the extra earnings.   If you had savings and investment accounts, you should have received Form 1099-INT and Form 1099 DIV statements for amounts over $ 10.  Copies of these forms are reported to the IRS.  Therefore, if they are not included with your tax return, you could also owe penalties and interest on the unreported earnings.

Make sure you choose the correct filing status for your situation. You have five options, and each could make a difference in your ultimate tax bill.

Verify Social Security Number for accuracy.  Make sure the names associated with the Social Security numbers match Social Security Administration records.

Not-so- Common Tax documents required for your Income Tax Return

These statements come from employers, banks, stockbrokers and other institutions.  These documents may come electronically.  Be sure to check your email and appropriate website for these reports, as well.   
 
A 1099-K is provided by third- party payment processors if you received credit/debit card from them. 

A 1099-R is issued by your broker, pension plan manager, or mutual fund company issue this if you receive a pension or a distribution from a retirement plan or individual retirement account (IRA). 

Companies provide Form 5498 to report IRA contributions.  This is a relatively new form, so you may have other documents reports your contributions.  If you have such forms, be sure to include them in with your tax documents.

Contributions to Coverdell education savings accounts or Education IRAs are reported on Form 5498-ESA.  The account beneficiary should get a copy of this document by April 30.

The Schedule K-1 reports money received from an estate, trust, partnership or S corporation. 

Inspect your Documents!

Verify your Name is spelled correctly, your Social Security Number is accurate, and the Address is current.  If any of this information is incorrect, you should contact the provider of the document to update the information error(s).   

Common Tax documents required for your Income Tax Return

These statements come from employers, banks, stockbrokers and other institutions.  These documents may come electronically, so be sure to check your email and appropriate website for these reports as well.   

Each Employer you worked for during any part of 2012 should provide you with a W2.  They should be mailed by January 31st. 

Employers who hire Subcontractors and certain Self-employed individuals to work for them should provide a 1099MISC to those who earned $600 or more.  As with a W2, you should get a separate 1099MISC from each employer. 

Mortgage interest may be tax-deductible.  Your lender is required to provide you with a statement if you paid at least $600 interest.  It may or may not be on an official IRS 1098 Mortgage Interest form.

Interest on bank accounts, certificate of deposits, savings bonds, and reinvested earnings are taxable income and included on the 1099-INT.  The institution must send you one if the interest earned is more than $ 10

The 1099-DIV reports earnings from individual stocks and mutual funds.  The institution must send you one if the dividends and capital gains distributed are over $ 10.

Mutual fund companies or brokers distribute Brokerage Statements when you sell stocks, bonds, or mutual funds.  The 1099-B reports the sale of these items. 

States issue to taxpayers who got a refund of state or local taxes last year will get a 1099-G.   It may or may not be considered taxable income.

Should I File a Tax Return?

If you received income during 2012, you may need to file a tax return in 2013. 

The amount of your income, your filing status, your age and the type of income you received will determine whether you’re required to file.

Even if you have determined that are not required to file a tax return this year, you may still want to file.

If your employer withheld federal income tax from your pay, if you made estimated tax payments, or if you had a prior year over-payment applied to this year’s tax, you could be due a refund.  You must file your return to claim any excess tax you paid during the year.

If you worked but earned less than $50,270 last year, you may qualify for the Earned Income Tax Credit (EITC).  Families with qualifying children, as well as qualified individuals may qualify for this credit.  Dollar amounts range from $ 475 to $ 5,891 dollars.  You must file your return to claim this refundable credit.

If you have at least one qualifying child and you don’t get the full amount of the Child Tax Credit, you may qualify for the Additional Child Tax Credit. You must file your return to claim this refundable credit.

If you or someone you support is a student, you might be eligible for the American Opportunity Credit. Students in their first four years of post-secondary education may qualify for as much as $2,500 through this partially refundable credit.  Even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.  You must file your return to claim the credit.