Beware of These 10 Common Tax Filing Mistakes

The American Institute of Certified Public Accountants (AICPA) has identified 10 common and avoidable errors taxpayers make on their federal tax returns that can affect their tax bill, delay processing of their return and even draw the attention of the Internal Revenue Service (IRS).


Low Cost Accounting Software Support

Provider of low cost support, consulting, training and custom report writing for MAS 90, MAS 200 and MAS 500 accounting software systems. Call us toll free at 1-866-762-3990 to learn how we can help.

The 10 common mistakes are:

  1. Leaving Off Attachments Attach all required schedules and forms to Form 1040 using the “Attachment Sequence Number” shown in the upper right corner of each schedule or form. Other statements and schedules can be attached at the end of the return even if they relate to another form or schedule. It’s also a good idea to include the taxpayer’s name and Social security number on every page of each form submitted.

  2. Forgetting About Carry-forwards from Prior Years Be sure to check returns from prior years to see if there are any items, such as capital losses or charitable deductions that exceeded the deductible amount for previous years, to be carried forward to the current year.

  3. Reporting Investment Income in the Wrong Place Earnings from money market funds are considered dividends by the IRS, although they are often mistakenly reported as “interest income”.

  4. Overpaying Your Social Security Taxes Individuals working two or more jobs during 2005 and whose total earning exceeded $90,000, may have overpaid Social Security taxes. See the instructions accompanying Form 1040 for information on how to claim a credit.

  5. Unnecessarily Declaring Your State Tax Refund as Income State tax refunds should not be declared as income on federal tax returns if the taxpayer did not receive a tax benefit from deducting the taxes. If the taxpayer took the standard deduction instead of itemizing in 2004, they do not have to show their state tax refund as income for 2005.

  6. Failing to Document Charitable Donations Written acknowledgement from the charity is required for monetary donations of $250 or more. If the gift was property valued at less than $500, the written acknowledgement must describe the property, while taxpayers are required to file IRS Form 8283, Noncash Charitable Contributions for contributions of property valued at more than $500.
  7. Omitting social Security Numbers of Dependents The Social Security number of all dependents MUST be included on the taxpayers’ federal tax return. Taxpayers claiming a child or dependent care credit should also complete IRS Form 2441 and indicate the caregiver’s name, address and taxpayer identification or social Security number.

  8. Making Math Miscalculations All calculations should be reviewed to be sure they are correct. Since some calculations affect other figures, mistakes can cascade and all the affected calculations should be reviewed.

  9. Failing to Calculate the Alternative Minimum Tax (AMT) As many as 16 million taxpayers are predicted to become subject to the AMT for the first time during the next two years. Many will not complete the AMT form 6251 because they don’t realize it applies to them, resulting in a nasty note from the IRS informing them that they owe more in taxes, as well as interest on the underpayment.

  10. Assuming Itemizing Deductions will Reduce the Tax Bite the Most Many taxpayers assume that itemizing deductions will result in the lowest federal tax bill, however, this may not be true. Taxpayers who have paid down most of the interest on their home mortgage, for instance, may be better off taking the standard deduction. For 2005, the standard deduction for a single taxpayer is $5,000 and $10,000 for married taxpayers filing jointly.

You may like these other stories...

The law makes it difficult for itemizers to deduct medical expenses. To reap any write-off, you must pay bills that aren't covered by insurance, reimbursed by employers or otherwise satisfied by, for example, a company-...
Drug patents held overseas can pare makers’ tax billsAs the Obama administration tries to stop companies from avoiding taxes by moving their headquarters overseas, the makers of some of the world’s most lucrative...
Starting in October, the IRS will send warning letters to tax return preparers who appear not to be complying with Earned Income Tax Credit (EITC) due diligence requirements.Section 6695(g) of the Internal Revenue Code...

Already a member? log in here.

Upcoming CPE Webinars

Oct 9In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards.
Oct 15This webinar presents the requirements of AU-C 600, Audits of Group Financial Statements (Including the Work of Component Auditors).
Oct 21Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience’s communication style.
Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.