Common Tax Errors & Reminders

Here are a few things to remember

  1. Check your social security and your dependents’ social security numbers.
  2. Show proof of cash contribution – you cannot deduct a cash contributions, regardless of the amount, unless you keep as record of the contribution.
  3. Foreign source income must be reported
  4. Automatic 6-month extension to file tax return – Use form 4868

Here are a few things to avoid common errors

  1. Check your social security number.
  2. Check that you’ve claimed all of your dependents and include their social security numbers.
  3. Don’t forget the Earned Income Credit, subject to phase out limitation for high wage earners.
  4. If you’re married, check to see if filing separate returns rather than a joint return is more beneficial. You should ask your CPA to run these two scenarios for you.
  5. If you worked for more than one employer, be sure to claim a credit for any overpaid social security taxes withheld from your wages
  6. Check last year’s tax return to see if there are any items that carry over to this year, such as charitable contributions or capital losses that exceeded the amount you were previously able to deduct.
  7. Fill out form 8606, Nondeductible IRA Contributions, for your contributions to an IRA account, if you don’t claim any deduction for the contribution.
  8. Recheck your basis in the securities that you sold during the year, particularly shares of a mutual fund. Income and capital gains dividends that were automatically reinvested in the fund over the years increase your basis in the mutual funds and thus reduce a gain or increase a loss that you have to report. Also, any “front-end” or purchase fees are still considered part of your cost basis for tax purposes, even though they reduce your investment in a mutual fund.
  9. You still have until April 17 to make 2011 IRA contributions. The maximum contribution amount is $5,000 if you’re 50 or younger at the end of 2011. If you are 50 or older, you are entitled to an additional “catch-up” amount of $1,000 making the total contribution $6,000
  10. If you get a large refund, you’re having too much withheld, and, in effect, giving the IRS an interest-free loan. Consider increasing the number of allowances on your W-4 form. Determine the right amount for your personal situation here.

Keep copies of all documents you send to the IRS.

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