1. Selecting the Correct Filing Status
Should you file Single or Head of Household? Are you Married Filing Joint or Married Filing Separate? The filing status to use is based on your status at the end of the preceding year.
Did you get divorced during the year? No matter what your status was in the beginning of the year, at the end of the year, you were single.
What about head of household? Do you financially support your significant other or a live-in friend? These examples would not qualify as head of household filing status.
2. Claiming improper dependents.
A person can only be claimed on one tax return each year. A dependency test is very important and must be satisfied before any dependent can be claimed. The test conditions are: the relationship to the taxpayer, residence, age of dependent and the support of the dependent for more than half of the year.
All four conditions must be met before a dependent can be claimed.
3. Missing income that wasn’t listed on a W2.
Income to report comes from many different places. An early distribution from an IRA, dividends reinvested from stock holdings, interest earned in a bank account, selling stock shares or gambling winnings from the casino. All of these examples are instances where income should be claimed.
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4. Missing or miscalculating tuition expense.
College students claimed as dependents by their parents cannot claim a credit for their own tuition expense. The tuition deduction would go to the parents.
There are also different types of education credits. It’s very important to know the difference between the types and choose the appropriate credit for your tax situation.
5. Not including information on a Health Savings Account
(HSA) Health savings accounts are becoming more common for employees. A tax return needs to report the amount contributed to the HSA and the amount distributed from the HSA.
6. Not staying current with tax law changes
Tax law is frequently changing. These changes can happen even after the tax year has ended, which can complicate filing. A CPA is required to attend ongoing education classes to stay current on the tax laws and changes.
About The Author
Richard E. Nelson SC has over 40 years of experience in the North Shore area. They deliver friendly service, professionalism, and guaranteed results for their clients. Unlike other financial service businesses, they are available all year round and place value on building relationships with their clients.
They specialize in individual, corporate, nonprofit, estate and trust tax returns. Additionally, they are experts in bookkeeping, business start-up support, payroll, and tax planning.
For more information, give them a call at (414) 354-4117 or visit bdtaxman.com.
