The filing of tax return can be really tricky and many a time the person commits mistake in filing of return . Internal Revenue Service or IRS have analysed the data of filed return and published the ten common mistakes in filing Form 1042S. That was for withholding tax for foreign persons US source income .So , one should be careful while filling the tax return form because even one innocent slip-up on your federal income tax return could cost you time and money. Here are ten most common mistakes while filing tax return in US
1. Not Take Your Home Office Expense
Many people who work from home or have their home business usually have an area set aside for work related purposes. Usually this business includes a computer with internet access, printer, office supplies and maybe even a phone. According to the IRS, you are able to deduct some of these expenses as business expenses.
There are various methods and the simplest one is to apply a percentage of use for these expenses. This means that if you can prove that you used your cell phone 20% of the time for business purposes, you are able to deduct 20% of your cell phone bill as a business expense. This may help lower your taxable income leading to a lower tax bill.
You can apply this method other expenses like your rent or internet access if you can prove a certain percentage is for business use. So if you have 1,000 sq ft house, and you use 100 sq ft solely for business, you are able to take 10% of your mortgage or rent expense as a business expense.
2. Not taking into account Business Mileage
Many people use their personal car as their business car without taking the mileage deduction. For 2014 you are allowed .56 cents per business mile driven. You can keep track of your mileage by buying a little notebook at any office supply store and write down how many miles you drive every day making a distinction between business and personal use. There are also many apps for your phone that can help with this that you can buy.
3. Forgetting to include dependents
People think that dependents deductions are only limited to your kids. However, dependents includes anyone for whom you provide 50% or more of their support. So if you have an in law that lives with you and you provide more than 50% of their income, they can be considered as a dependent on your tax return. Make sure that you make them aware so that they can mark as such on their return if they are required to file.
4. Not including income you didnít receive W2 for
Sometimes people have short term jobs for which they never get a W2 for. However, even if you donít get a W2, employers are required to send this information to the IRS. If you donít get a W2, you should call the employer and ask for the information. If they still donít send you any information, you can use the last paycheck stub you received which should have most of the information you need.
5. Mixing Businesss with Personal expenses
A common mistake small business owners make is mix their business and personal expenses. All business owners should have a separate business bank account used solely for their business. A good rule of thumb is to only use your business account during work hours. The rest of the time pull out your personal card. This makes it easy to determine if you are making a business or personal purchases.
Having a separate business bank account also makes it easier at the end of the year when preparing your tax returns.
6. Not including Barter
Most people do not even consider including items they bartered on. If you bartered for something you need to include it in Schedule C of your Form 1040. Although this may not be very often, it is still an important thing to do if you want to maintain correct tax filings.
7. Not deducting your medical expenses
If you are itemizing your should remember to also include your medical expenses. Anything from a doctorís visit, to filling prescriptions to hospital stays can make the difference between getting a refund or owing taxes.
8. Forgetting to add your Mortgage Interest
Donít forget to add your mortgage interest to your tax return. Although you may not itemize, it never hurts to verify if itemizing gives you a greater tax benefit than using the standard deduction. If you are itemizing make sure to include any donations (see below) you made as well as medical expenses (see above).
9. Not saving receipts for donations
Whether you drop off something at Goodwill or donate cash to your church, it is important to keep track of these donations and to keep records of how much you donated. It is easier to keep track on a monthly basis than it is to try and remember how much that old chair you dropped off was worth on April 14th.
10. Not filing on time
This one is fairly obvious. For most individuals, you must file your tax return on April 15th of every year. If the date falls on a weekend or a holiday, the return is due on the next business day. You are able to apply for a 6 month extension by submitting IRS Form 4868. You still have to pay any tax you owe. The extension is only an extension to file and not an extension of payment.
[infobox style=”alert-info”]The aforesaid piece of article is written by Ramon Santillan who is a Tax Accountant with over 13 years of experience with Federal, State & Local experience with deep knowledge of Fixed Assets. He can be reached on www.linkedin.com/in/ramonsantillan/ [/infobox]