The IRS sees a lot of silly tax errors – here are the ones they warn against
Given that it seems like the deadline for filing taxes is always fast approaching, the IRS posted a list of common taxpayer errors that could hamper the processing of your taxes, including delaying any refunds that you might be due.
Here are a few excerpts directly from the IRS:
Report all taxable income. Be sure to have income documents on hand before starting the tax return. Examples are Forms W-2, 1099-MISC or 1099-NEC. Underreporting income may lead to penalties and interest.
Get names and Social Security numbers right. Enter each Social Security number (SSN) and individual’s name on a tax return exactly as printed on the Social Security card. Persons generally must list on their individual income tax return the SSN of any person they claim as a dependent. If a dependent or spouse does not have and is not eligible to get a SSN, list the Individual Tax Identification Number (TIN) instead of a SSN.
Correctly answer the virtual currency question. The 2020 Form 1040 asks whether at any time during 2020, a person received, sold, sent, exchanged or otherwise acquired any financial interest in any virtual currency. If a taxpayer’s only transactions involving virtual currency during 2020 were purchases of virtual currency, they are not required to answer “yes” to the question.
Mail paper returns to the right address. Paper filers should check the right address for where to file on IRS.gov or on form instructions to avoid processing delays. Note that due to staffing issues related to COVID-19, processing paper tax returns could take much longer than usual. Taxpayers and tax professionals are encouraged to file electronically if possible.
Use the right routing and account numbers. Requesting direct deposit of a federal refund into one, two or even three accounts is convenient and allows the taxpayer access to his or her money faster. Make sure the financial institution routing and account numbers entered on the return are accurate. Incorrect numbers can cause a refund to be delayed or deposited into the wrong account. Taxpayers can also use their refund to purchase U.S. Savings Bonds.
Sign and date the return. If filing a joint return, both spouses must sign and date the return. E-filers can sign using a self-selected personal identification number (PIN).
Keep a copy. When ready to file, taxpayers should make a copy of their signed return and all schedules for their records.
Request an extension, if needed. Taxpayers who cannot meet the deadline can easily request an automatic filing extension and prevent late filing penalties. Use Free File or Form 4868.
Your Financial Advisor
The fact is that the CARES Act was by far the largest economic bill in America’s history and the 2nd and 3rd COVID relief details are part of bills that were thousands and thousands of pages long. Further, with a federal tax code that is over 2,500 pages, no wonder tax strategies can be overwhelming.
So, before you go down a path that might not be in your best interest long–term, make sure you consult with your financial advisor to determine how the new tax changes and new tax bills might impact you and your family. At Patriot, our advisors will always consider the tax consequences when it comes to managing your assets and navigating your financial life. Contact us today if you have any questions.