Death and taxes are inevitable but so are mistakes. Here are some of the most common mistakes on tax returns, according to the IRS and other sources:

• Rebates and credits: Supposedly the No.1 mistake in returns filed last year was the incorrect handling of the 2008 recovery rebate. More than 2 million returns did not include or incorrectly figured the rebate, according to published reports. Some tax experts are advising this year to include the “Making Work Pay” tax credit that was part of the 2009 stimulus package. The credit is worth $400 for individuals and $800 for couples.
• Capital gains: Short-term capital gains apply to assets owned for less than a year. After that they become long-term gains, which are preferable because they are generally taxed at a lower rate than your regular income (which includes short-term capital gains). A loss can also lower your taxable income, but it gets tricky. First you must net the gains and losses. The short-term loss is subtracted from the short-term gain and then the long-term loss is subtracted from the long-term gain and the results are netted against each other. If you still end up with a loss, up to $3,000 of it can be subtracted from your taxable income.
• Filing status: Many choose the incorrect filing status (there are five), which can affect the deduction. For example, someone might have become a widow or widower since filing the last return, and check another status out of habit. It might sound like a simple clerical issue, but filing status determines which tax rates and which standard deduction amounts apply.
• Math: It might sound basic, but math mistakes are among the leading reasons the IRS has to adjust a return. And who really wants to catch the attention of the IRS? Be safe and compute twice.
• Deductions: Many errors occur when trying to figure out the taxable income. Commonly overlooked items are earned income tax credit, standard deduction for age 65 or over or being blind, the taxable amount of Social Security benefits, and the child and dependent care credit.

Dumb stuff: These are the details that trip up many people. Be sure of Social Security numbers for anyone listed on the tax return. Also be sure of a dependent’s last name. Sounds odd, but the IRS says lots of people make this mistake. And, don’t forget to sign the return!

This entry was posted on Friday, April 2nd, 2010 at 9:28 am and is filed under Tax Advice. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.