Article | Transcript | Info Graphic
Scott: Hello everyone, thank you for joining us. Scott [Tennel] here with DCC Financial Freedom Community. I’m here today with Thomas Abblett, CPA from Boca Raton, Florida. Today, we’re going to talk about … What are the most common filing errors you see when people do their taxes?
Thomas: Scott, there’s a few of them that people make. One of the biggest ones is the dependency exemptions. Are they allowed to take their child? Are they not allowed to take their child? Can they take a family member that’s living with them? It’s a complex matrix that you have to walk through to do it. The IRS does have some matrices in the instructions that they can go through, or again, if they talk with a qualified professional, hopefully they know the answers to that. That is one big error. It seems silly but it is. The other is when a child files for themselves, if they are a teenager, and they have their summer job, that they put down that they are their own dependent. That’s incorrect. They need to put down that they are dependent on another return, and then their parents get to claim them as the dependent.
Some of the other things, and one of the more common computational errors is involved with the earned income credit. It can be a very large credit for some people, some low income earners that have children, that don’t have children. It is a common error. The one unfortunate thing with that is if you do make an error, and the IRS figures that out they can stop you from claiming that credit for the next 10 years. It’s almost a sizable penalty that you can incur, so you do want to make sure that you calculate that correctly. This day and age, the IRS website still says that there are mathematical errors. I don’t know how that works with all the software that’s out there, but I guess some people still do it by hand, making mathematical errors, picking up the wrong tax rates and tax tables when they compute their returns.
Those are some of the bigger errors right now. The other thing too, is on the deduction side, taking deductions that you may not be entitled to is the thing. Everybody wants to deduct everything, but unfortunately everything is deductable.
Thomas: If you have a business, making sure that it is a true, legitimate business expense that you’re deducting on there, keeping the receipts, keeping the documentation for it is the thing. That’s one of the big things that’s on there. The other is retirement plan contributions. People can take that deduction if they want to make a contribution, even a small contribution to a retirement plan can help tax-wise is the thing, but there are again, some things that you have to step through to make sure that you’re computing it correctly.
Scott: Okay, excellent. Great advice.
Thomas: Thank you.
Scott: Well, from DCC Financial Community, I’m Scott [Tennel] here with Thomas Albot and thank you for joining us.
Thomas: Thank you.