YOUR TAXES
I Did WHAT? Last-Minute Tax Mistakes to Avoid
The most organized among us can overlook important tax details in the rush to complete our tax returns. And these mistakes can be costly. That's why it's important to be wary of four common filing mistakes:
Mistake #1: Failing to Claim Above-the-Line Deductions & Credits
The Earned Income Tax Credit, Child Care Tax Credit, various education tax deductions and IRA-contribution deductions are all available even if the taxpayer doesn't itemize.
Mistake #2: Not Itemizing Deductions
According to the Government Accountability Office (GAO), more than two million taxpayers use the standard deduction even though they could save more in taxes by itemizing. For example, nearly one million people fail to itemize mortgage interest. This results in an overpayment of more than $470 million in taxes, according to a 2002 GAO report.
Taxpayers should also consider itemizing the following deductions:
- Medical expenses (health insurance premiums, prescriptions and other qualified medical expenses).
- State and local income tax and personal property tax.
- Charitable contributions (to churches and other non-profit organizations).
- Out-of-pocket job expenses not reimbursed by employers.
Mistake #3: Missing Out on Last-Minute Tax Breaks
Taxpayers have until April 15 of the following year to make a tax deductible contribution to a traditional IRA. For tax year 2007, the maximum IRA contribution that can be deducted is $4,000 ($5,000 if you're at least 50 years old). So if you're looking for a last-minute tax tip, opening a traditional IRA is an attractive move between year-end and April 15.
Mistake #4: Making Simple Errors
According to the Internal Revenue Service, numerical errors (such as miscalculations or typographical errors) and incorrect Social Security numbers are the two most common mistakes on tax returns. These simple errors often lead to delays, notices from the IRS and other problems that can be avoided by taking a few minutes to double-check all the numbers.