Year after year, the IRS sees Americans committing the same mistakes on their returns. Many of these errors are easy to avoid; some are more complicated. Nevertheless, whenever in doubt, seek the advice of a professional tax consultant.

Claiming the Wrong Filing Status

Claiming the wrong status could ruin your eligibility for the child tax credit, the earned-income credit and exemptions for dependents. Check out Form 1040 for information to help you select your correct filing status.

Omitting or Using Incorrect Social Security Numbers

The Social Security Numbers you list for your dependents, the earned-income credit and the child tax credit must match your dependents’ Social Security cards. Otherwise, the IRS will reject your credits and deductions. If you’re still doing your return by hand, make sure your handwriting is legible.

Failing To Use Correct Forms and Schedules

Think of the IRS as a vast bureaucracy that responds to the directives of an outdated computer system for audit direction. So, be nice to the computer. Correctly file all of the appropriate forms.

Failing To Sign and Date the Return

Technically, if you don’t sign the return, you haven’t filed. And, if you haven’t filed, you’re going to be subject to all kinds of penalties, not to mention interest on any amounts not paid in full. Don’t forget, both spouses MUST sign a joint return.

Claiming Ineligible Dependents

When the IRS started requiring Social Security numbers for claimed dependents, millions of dependents disappeared. In any case, the qualification criteria to claim a dependent are very specific. Follow the instructions on Form 1040.

Not Using the Earned-Income Credit

It’s a provision to help the poorest in our nation. Unfortunately, because it is one of the most convoluted provisions in our tax code, the IRS reports failure to claim the earned-income credit as its No. 6 top taxpayer mistake!

Failing To Report All Income

Not all income is reported on a W-2 form or a 1099. The fact that there’s no reporting to the IRS doesn’t prevent the agency from auditing your receipts and reconciling your bank deposits with your reported income. Unreported income can lead to civil and criminal sanctions.

Failing To Check For the Alternative Minimum Tax

The AMT, or “awfully mean tax,” was created to catch high-income taxpayers who used allowable deductions and credits to greatly reduce their tax liability. Unfortunately, because it hasn’t been updated to reflect inflation since the original bill was passed, the AMT was projected to hit about 19 million families in 2007. The IRS has an AMT estimation calculator on its Web site, but, to be sure, run through Form 6251.

DMB Financial LLC is not giving tax advice and recommends that you consult your tax attorney or accountant with any tax-related questions.

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