*|FNAME|*,
Just a reminder as you are preparing your 2021 Income Tax returns ...
Many mistakes are common, and not all mistakes will lead to an audit. However, care to be as accurate as possible. Avoid the following oversights that can lead to IRS scrutiny.
Unreported or Underreported Income
Generally, all income is taxable and will be reported to you and the government. If the income you report doesn’t match the records sent to the IRS, you will receive a letter charging you with more tax (and interest on it).
Be sure to include income from any W-2 and any 1099 (-B, -DIV, -MISC, -R, -INT –SSA)
Some income will not be reported on a form to you, such as rents from a vacation home. These must be included also.
Misreporting Gains and Losses
You need to know both the cost of the investment and the sales price in order to determine the gain or loss. Financial institutions are required to provide cost information on a Form 1099. Brokerages are not required to provide this for investment purchased prior to a certain date. YOU are responsible for it.
Unsupported Deductions
The IRS keeps a close eye on deduction abuse. A deduction that is especially large and/or unusual will draw attention or “red flag”.
Be sure to keep meticulous records to support your deductions.
Receipts, bank or credit card statements, proof of payment
Verify donations are to a qualified charity.
Fat Finger Type-o’s
Sometimes the simplest mistakes can cause the biggest headaches.
Entering the wrong social security number, tax identification number, or address can be a major undertaking to correct.
Review ALL the numbers on your return
Are they correct?
Does everything add up right?
Do supporting amounts carry through to the proper line?
Double check all NAMES are spelled correctly
Compare this year’s return to last year’s
Are all differences explained?
Is anything missing?
Is anything new?
Sign and date ALL forms, not just the 1040. There may be others.
Using tax-preparation software can increase the overall accuracy of your return.
However, you are ultimately responsible for what is reported to the IRS.
Photo by Kelly Sikkema on Unsplash