Following are ten of the most common mistakes made each year by individual taxpayers on their federal tax returns. These avoidable errors can affect your tax bill, delay the processing of your return and draw the attention of the Internal Revenue Service.Mistake #1: Leaving Off Attachments -- Make sure you've completed and attached to your Form 1040 all required schedules and forms. You should attach them using the "Attachment Sequence Number" shown in the upper right corner of each schedule or form. Attach other statements and schedules at the end of your return, even if they relate to another form or schedule. Also, it's a good idea to include your name and Social Security number on every page of each form you submit.
Mistake #2: Forgetting About Carry-Forwards from Prior Years -- Make sure to check prior years' returns to see if there are any items to be carried forward to this year, such as capital losses or charitable deductions that exceeded the amount you were able to deduct in previous years.
Mistake #3: Reporting Investment Income in the Wrong Place -- Some taxpayers mistakenly report earnings from money market funds as "interest income" when, in fact, the IRS considers such earnings to be dividends.
Mistake #4: Overpaying Your Social Security Taxes -- If you worked at two or more jobs in 1996 and your total earnings exceeded $62,700, you may have overpaid your Social Security taxes. The instructions that come with your Form 1040 will tell you how to claim a credit.
Mistake #5: Unnecessarily Declaring Your State Tax Refund as Income -- Do not declare your state tax refund as income on your federal return if you did not receive a tax benefit from deducting the taxes. Many people make the mistake of automatically reporting state tax refunds as income. If you took the standard deduction instead of itemizing in 1995, you don't have to show your state tax refund as income for 1996.
Mistake #6: Failing to Document Charitable Donations -- For charitable donations of $250 or more, contemporaneous written acknowledgment from the charity is now required. A canceled check is no longer sufficient. If your gift was one of property rather than cash, the acknowledgment must describe the property. When your noncash contribution exceeds $500, you also are required to file IRS Form 8283, Noncash Charitable Contributions, giving details of the donation.
Mistake #7: Omitting Needed Social Security Numbers of Dependents -- You MUST include on your tax return the Social Security number for all dependents who were born on or before November 30, l996 or else lose the exemption. Also, to claim a child or dependent care credit, you must complete Form 2441 and indicate the caregiver's name, address and taxpayer identification or Social Security number.
Mistake #8: Making Math Miscalculations -- Review your return to make sure that your math is correct. If you find a mistake, remember to recalculate other figures that are affected by the error.
Mistake #9: Forgetting to Sign and Date Your Return -- Make sure you've signed and dated your return as well as included your check if taxes are due. If you're filing a joint return, your spouse must sign the return as well, even if he or she did not report any income. Make your check out to the Internal Revenue Service and be sure the front of the check shows your name, address, Social Security number, form number and tax year. Do not attach your check to the form. And, to help speed the processing of your return, use the mailing label and bar-coded envelope that comes in your tax package.
Mistake #10: Not Keeping Sufficient Documentation -- To maintain proof of your timely filing, make copies of everything you submit and consider filing the return by certified mail with return receipt requested. If your return is lost in the mail, the tax code recognizes a certified or registered mail receipt as proof of filing. For the first time this year, some express delivery service receipts also will be accepted.
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