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SALT LAKE CITY -- A lot of us are hoping to get an early start on our tax returns as soon as we get our W2 forms. But before you send your return in, be aware of some common mistakes people make that you should look out for.
Some of the most common errors, according to the IRS, include things like math mistakes, putting estimated payments in the wrong line on the form, and even writing down the wrong social security numbers. CPA Becki Schreyer with Stayner, Bates and Jensen said parents make that last mistake all the time.
"They probably mess up their kids' [social security numbers] more than they do their own," she said. Other mistakes may seem surprising, but the IRS points out they happen frequently enough.
- Did you put a postage stamp on your envelope?
- Did you check more than one filing status?
- Did you clearly print your name?
These mistakes are made by people not using tax service software programs. Schreyer said these programs do a great job of preventing big mistakes. All of the math errors, numbers in wrong boxes and misplacing the order of the forms are essentially cleared away with the right software.
That said, there are a few things that tax programs can have a hard time picking up.
Depreciation values
Reporting something's depreciation on your return is not an easy task. Schreyer said there are so many rules that are applied in different ways depending on what the item is and how it is used.
"You have to know those laws that are associated with it. How are they going to depreciate it? [What is] the year that it goes into service?" she said.
Schreyer said it's extremely difficult for taxpayers to know what rules apply to them. So, when someone uses their tax software for the first time, they can input some wrong information and the program wouldn't know how to fix it.
Tuition credits
When someone uses a tax program for the very first time, they go through what is sometimes called an "interview process." This is where the taxpayer gives the program all of the initial data it needs to correctly sort where certain items should go and what kind of credits should be given.
One of the questions is about tuition. If the taxpayer applies for a tuition credit, they might not know that not all tuition credits are the same. Schreyer said people get a different credit for their first four years of college than they do after four years. If you first use the software when you're a junior, but you keep using it when you start your graduate work, the software won't automatically know when to update your information.
"The software can't fix [your status] if you haven't been in school up to four years. They're not going to change what type of credit it is if you don't put it in [the program] right," Schreyer said.
So, if you've entered your fifth year of studies, you'll need to update that information in your tax software.
Cash v. non-cash contributions
There are certain mistakes that are likely to trigger the IRS to send you a CP 2000 clarification form, which is sometimes followed by an audit if it isn't filled out correctly.
"Probably one of the bigger things is if you would mess up something like putting your cash contributions, and they're fairly high, and making those non-cash contributions. That's going to automatically send them (the IRS) to look at your records," Schreyer said.
She said she has seen many people assume that all donations or contributions are counted the same. But cash donations are taxed at a different rate than donations like clothing or cars. Plus, the IRS wants more information about your non-cash donations, like what was the item appraised at and where the item went.
E-mail: pnelson@ksl.com
