The federal government will soon begin processing the federal tax returns of millions of Americans across the country.
And millions of Americans make mistakes on their tax return forms regularly.
The McPherson Sentinel contacted local CPAs and firms to get some tips and tricks to avoid mistakes on your federal tax return this year.
Siri D. Harrell, CPA
Siri D. Harrell, CPA, said she sees plenty of forms come across her desk with bad math and missing information. To ensure that an individual possesses all the information needed, Harrell recommends waiting until after the first of February before filing a federal tax form.
“A lot of people are in a rush to finish as fast as they can,” Harrell said. “If you wait a few days in February, you can ensure that you might have that missing W2 or 1099 form.”
Harrell also suggests hiring a professional to help on a federal tax return. She described the decision to be similar to getting a haircut or an oil change.
“I don’t cut my own hair. I don’t change the oil in my car,” Harrell said. “I would imagine you’d go to a professional. And I would highly recommend a professional take a look at your tax return.”
When preparing your tax return for a professional, Harrell recommends ensuring that all the necessary details are listed, including previous year tax returns, any dependents, their Social Security numbers, their date of birth and any necessary government documents.
David O’Dell, CPA
David O’Dell, CPA, also encourages individuals to have a professional review of their federal tax returns, and encourages individuals not to wait until the last minute.
O’Dell encourages a continued line of contact with a hired CPA or accounting firm in order to simplify the process come tax time. Contact once a month, with any appropriate income forms, helps to keep tabs on total income in a year.
“For us, it’s a year-long process,” O’Dell said.
O’Dell said he often sees nicknames used on federal tax returns. To avoid any confusion, he said the name placed on a federal tax return should match the name on the person’s associated Social Security card.
O’Dell also encourages reading as much about the subject, including any monthly or bi-weekly newsletter that tax agencies provide.
“The more knowledgeable the client is, the easier it’ll be for the professional preparing the return,” O’Dell said. “If the client reads as much as they can before coming to (their chosen professional), it greatly simplifies the process and makes it easier to communicate between one another.”
Page 2 of 2 - O’Dell provides a monthly newsletter for his own site, which can be found at www.cpa7.com/newsletter.php. His January letter includes a list of the changes affected by the 2012 Taxpayer Relief Act —also known as the fiscal cliff deal — that was signed on Jan. 2.
O’Dell said a significant change that was just announced will allow framers to file in the regular filing period instead of waiting until March 1.
“This will allow farmers to file timely by April 15,” he said.” It’s a big change.”
Swindoll, Janzen, Hawk & Loyd, LLC
Keith Janzen, partner at Swindoll, Janzen, Hawk & Loyd, LLC, also encourages organization before filing a federal tax return. Janzen said efficient organization allows an individual to start earlier and give time to double check their work.
“Mistakes usually happen when you are in a rush, and forgetting to put a stamp on your tax return would be a horrible reason for it to be late,” Janzen said.
Janzen also shared some common mistakes that he sees on tax returns. One of the most common, he said, was choosing the wrong filing status. The options available for filing status include single, married filing jointly, married filing separately, head of household or qualifying widow(er) with a dependent child.
Janzen said that filing status is determined by the last day of the tax year, meaning that anything else throughout the year doesn’t matter.
“If you divorced in February and remarried in December, then your status (on your federal tax return) would be married,” said Janzen.
Another common mistake, Janzen said, is claiming ineligible dependents. To claim a dependent, the person must be your child, step-child, adopted child, foster child, brother, sister or descendant of any of the above. The claimed dependent must also be younger than 19 years of age or younger than 24 years of age and a full-time student for at least five months out of the claimed year. The person also may be of any age and permanently disabled. Finally, the person may be claimed a dependent if they did not provide more than half of their own support during the year.
For independent contractors that earned more than $600 in the year, Janzen said to send a Form 1099 showing non-employee income.
“Although there can be tax benefits to having an independent contractor, if they are not actually independent it will cost you more in the long run,” he said.