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.