As featured in The Wall Street Journal, Money Magazine, and more!
     

Seven Tax Mistakes You Might Make, Part 1

This article was written by in Taxes. 6 comments.


First of all, I finished my taxes over the weekend. I started out using Turbo Tax Online, which I have used for the last three years. I decided to look around for better deals, and I’ve settled on Tax Act for now. I may not file online, however.

While my initial estimates had me owing $2,000, adding in a deduction for my education expenses, I brought that down to about $1,000. Then I decided to take a better look at my 1099 income. It turns out I had quite a bit of business-related expenses I’ll be able to combine with that income to significantly reduce my tax.

The latest calculation with Tax Act shows I’m due a $12 refund. I think I’ll take it. But perhaps I made some mistakes. There are seven common tax mistakes:

1. Bad Math. My calculations were done online, so supposedly the tax software can handle addition and subtraction. This is the number one mistake according to the IRS, and it seems like it’s something easy to fix with a little double-checking.

2. Forgetting About Interest and Dividends. The IRS tries to match your submission with those of the banks, but sometimes even the government makes mistakes. If you get a notice from the IRS, double check it against your records. And make sure your submission is correct; 1099-INTs and 1099-DIVs have become a little more complicated in the past few years.

3. Not Properly Tracking Investment Basis. The interesting point is this: your basis is not only the amount with which you initially invest. “The basis actually increases once any financial gains you reinvested are taxed.” I didn’t know that.

I’ll finish the seven mistakes in a following entry.

Updated March 21, 2011 and originally published February 15, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦127,535
Rank: Platinum
About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 3 comments… read them below or add one }

avatar Will Kirby

This was the first year that I really had some serious investment calculations to throw in with my taxes. I’m a little nervous about it but I think I got it all right. I had some many splits, reverse splits, special dividends, sales off of the various splits and dividends – basically it made me feel like I was a complete idiot for about an hour or two. Hopefully those good folks at the internal revenue service feel that I got it right!

Reply to this comment

avatar real people, real finances

Basis is always a pain at tax time if you haven’t bee organized.

Reply to this comment

avatar poohsac

Iam a disabled veteran and did not know if I should submit a 1040, so I DID, the problem is that my daughter always claims myself and so because she contributes more than 50% to our household because of the small amount of money received through the VA administration (less than 5000.00 per year for us to live on. I shoud not have submitted the 1040, I am not entitled to the stimulus I MADE A MISTAKE and do not want to jepordise my daugheter from getting the money, WHAT DO I DO? HELP

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: