April 15, 2018 falls on a Sunday and Emancipation Day (a holiday celebrated in Washington, D.C., commemorating the DC Compensated Emancipation Act of 1862 that ended slavery in the nation’s capital) means Tax Day for the 2017 tax year will be April 17, 2018. Many people prepare their own tax returns, so we wanted to remind readers of a few common tax preparation mistakes and ways to avoid them.
The Internal Revenue Service(IRS) instructions for preparing tax returns are quite comprehensive. For the DIY crowd, this is a great advantage. However, it’s the small things—stupid mistakes—that most often sneak into your documents and cause problems. Here are just a few tips to keep in mind:
- Prepare your tax return as early possible. Waiting until the last possible moment increases your chances of making mistakes. Give yourself time to gather documents or research details. Better yet, gather these documents throughout the year in a special folder so you have them when you need them at tax time.
- Use the proper tax rates. Tax tables can be dense and difficult to read; use extra care. For example, the IRS considers precious metals a “collectible” for income tax purposes, according to Anthony Allen Anderson – VP of Sales and Marketing at GSI Exchange, a precious metals dealer in Calabasas, California. Gains on collectibles held for less than one year are taxed as ordinary income – the same tax treatment as short term capital gains. Gains on collectibles that are held for more than one year are treated as long term and taxed at a maximum rate of 28%.
- Fill in every line. If a line item on a form doesn’t apply to you, put a zero or a strike through where the amounts would be. That indicates you determined it doesn’t apply to you.
- Make sure all your tax-related documents are complete. Attach forms, schedules, supporting statements and explanations. If you need more space, attach separate sheets that are the same size and format as the printed forms. Transfer the totals onto the printed forms. Put your name, social security number and date on all extra pages.
- Rounding is OK. Round off all amounts on your tax return. Round up to the next dollar all amounts that are 50 cents or more. Round down all amounts that are between one and 49 cents.
- Pay your taxes on time. File your taxes on time. The quickest way to get the IRS to pay special attention to you is to pay your taxes late or file your return after the deadline.
- Reply promptly to all IRS inquiries. Ignoring the IRS is asking for trouble—you could be audited or incur additional penalties, or worse (or both).
- Ask another person to review your tax return to check your math and ensure that all required fields are properly accounted for. Math errors are the most frequent mistake on individual tax returns.
- Don’t forget to sign the tax return. If you pay someone to prepare your taxes, that person must sign your tax return. But, you must sign and date your own tax return no matter who prepares it.
- Keep copies of your tax return and all supporting documents. You’ll need them next year, and you should keep them for another five to seven years after that before destroying them.