With the tax return filing in full swing, here are some points to remember while filling in the forms. Make sure to avoid making the following mistakes.
- Not Including all income: Make sure to include income from all your W2 if you had multiple jobs. Many people get dividends or savings interest from some high yield accounts throughout the year. Banks or brokers send a form called 1099 forms which have details about these incomes and need to be reported as well. Usually deadline for getting these forms have been 16th Feb. So wait at least until then to file your taxes. Sometimes a bank might not even send the form. In such cases its a good idea to proactively enter an entry based on how much money you got in dividends or interest from a bank in previous year.
- Not selecting correct deductions: Filing as single or head of household are different things and you need to make sure you are not filing in a wrong category to get more deductions.
- Not filing on time: Although IRS gives usually till mid-April to file returns. It’s a good idea to do them by end of February. This allows you to get your refund on time and also allows you to make an amendment in case you catch a mistake later on. If worst comes to worst, then make sure to get an extension to file your returns late.
- Not adjusting cost basis for ESPP/RSU’s: When you sell your ESPP or RSU’s within 2 years of them being granted. Your cost basis is reported incorrectly by the broker in the 1099 form. So you need to get it reported correctly by adjusting the cost of basis. This avoids getting double taxed on some income of yours.
- Not double checking: Most software’s now a day allow you to save your progress while filing returns and continue later. They also allow you to review your return before submission. It’s a great idea to make sure nothing went wrong while filling your return. Make sure to check for right amounts, deductions, account numbers where you get back your return, social security numbers etc.
- Not filing tax returns at all: Based on your filing status, income earned and age. You may or may not be required to file tax returns. But if you are eligible to file tax return then you must file them even if you don’t expect to get tax return from the government or you don’t owe any taxes. Usually most tax software allows you to fill your information for free. They will let you know if you will receive any returns or if you owe any taxes before filing. You must use them to figure out if you are required to fill tax returns and make sure you do them. This also prevents you from being potentially audited in future.
- Filing wrong tax forms: There are different forms like 1040, 1040A, 1040 EZ, 1040 NR. One is for nonresidents, one for simple tax return, one more complex and for itemization. Most tax software do walk you through the whole process. It will ask you questions based on which they will determine which form you need to fill.
So keep these things in mind while filing your tax return and hopefully you should not have to file an amendment later.