It’s tax season, and I’m double-checking my return before filing. I’m checking for seven typical mistakes. I began mentioning MSN’s seven tax mistakes earlier, and now I’ll finish up those thoughts.
4. Getting married. According to MSN, a “marriage penalty” still exists. “[T]wo individuals who each earn $70,000 in taxable income [and file as a couple] would be required to pay $28,931.50 in taxes — $601.50 more than what they would have paid had they remained single.”
5. Losing track of receipts. Generally, receipts should be kept for three years. After that time, the IRS can’t question your deductions (according to MSN). Most of my purchases affecting my 1099 income were purchase donline, so I can fairly easily pull up receipts if necessary.
6. Failing to bunch deductions. In order to claim deductions, they have to add up to more than a certain percentage of your income. You can prepay for some expenses, such as medical expenses, in order to reach that threshhold in one year.
7. Forgetting to donate unwanted items to charity before Dec. 31. You’ll need a receipt in order to get the deduction, but the receipt details can be hand-written, but a date is necessary.
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{ 5 comments… read them below or add one }
Unfortunately we can’t act on tips #3 and $4 anymore, since the cutoffs for those would’ve been 12/31/05. Good to keep in mind though!
I know that tip #4 really catches a lot of people. It got my dad a few years ago when he did some after Christmas cleaning and donated some things shortly after the first of the year.
Re: #4 : When we donate items, we get a receipt and detail the items given on Excel. Then we staple them together and put them in our tax file — nothing lost or forgotten.
Sometimes things are more important than the money – I’d say that number 1 falls into that category.
Oh, and for number 4. We actually let the neighborhood know when we are going to take things to the goodwill. It’s amazing how many people are lazy and don’t want to make the trip. We just add the value of their stuff to our tax deduction.