25 Feb Avoid These 3 Costly Errors On Your Tax Return
The scope of the tax code is noteworthy. Despite this fact, filing an accurate, complete income tax return saves you time and money. In a desire to reach the aforementioned goal, note the following three tidbits of tax law you must know:
- Each taxpayer’s filing status is determined at the end of each year for income tax return filing purposes. You and your accountant should discuss this life scenario each year whether your filing status has changed or remained the same as of 12/31. A common income tax return filing status error is when a married person claims the head of household filing status when his or her filing status should be married filing jointly or married filing separately. Be mindful that the choices of filing status for a taxpayer that has lived with his or her spouse within the last 6 months of the year is either married filing jointly or married filing separately.
- There are several types of income that is recognized in our economy. Do self-employment income, wages and salaries, bartering income, unemployment compensation, interest received, etc. come to your mind? Income is an impactful resource. Be careful not to misclassify self-employment income as other income. As the sharing economy gains momentum and various life events affect your household, it is a best practice to discuss your income sources with your accountant so as to identify the appropriate line item on your income tax return to report income.
- For a few years now, health care coverage has been a reportable item on the Form 1040, U. S. Individual Income Tax Return. As a matter of fact, everyone in your tax household is required by a provision within the Affordable Care Act to have health care coverage. There are exceptions to this rule referred to as claiming a coverage exemption. It is cost effective for taxpayers who do not have health care coverage any month of the year to research if they qualify for a coverage exemption. Otherwise, a taxpayer and his or her tax household are required to have health care coverage or pay a shared responsibility payment (See Individual Shared Responsibility Provision – Exemptions: Claiming or Reporting www.irs.gov).
Yes, being knowledgeable about tax law is helpful to your goal of paying only the tax you owe. But, errors on an income tax return cost time and money. Feel free to contact us to discuss ways to continue your high level of voluntary tax compliance and to mitigate errors on your income tax return. Best wishes!