Well, think twice before you file that return my friends. Our friendly federal government is out there and thanks to powerful computers and algorithms, it's watching us and our tax returns.
I am not a CPA and I don't give tax advice. But I know common errors when I see them--and here are my top 5 tax return errors:
1. Claiming "head of household" when you are married. Big no no. If you're married, you are either filing your returns as "Married" or "Married Filing Separately." You may not file as head of household when you are married. When the IRS determines that you were married, it will come after you and force you to amend your returns for the years you were married--yes you'll likely have tax liability.
2. Claiming the home buying tax credit when you don't qualify. Another big no no that triggers huge liability--like $7,500 worth of tax liability. Read the fine print to make sure that your home purchase actually qualifies before you take this credit. Same goes for the energy efficiency credits and rebates. Yes, there are IRS auditors whose job it is to ferret out those who take these credits wrongfully. Don't be tempted.
3. Claiming kids that aren't yours to claim. Either you're divorced and your decree spells out who gets to claim the kids, you're married filing separately and you've agreed who claims which child, or you were never married and you've agreed who claims whom. Don't think for a second that the IRS doesn't cross check the social security number of the kids names provided on your return to see if more than one filer claims a child.
4. Leaving rental income off your return, but taking the repair and/or mortgage interest deduction. Ouch, this is not smart my friends. If you're claiming the mortgage interest deduction and/or taking repair deductions for your rental property, you had better be declaring the income you received.
5. Relying on the tax advice on a tax preparer who is not a CPA. I hate to denigrate other professionals but please use caution when selecting your tax preparer. I have seen many returns that were prepared by tax professionals who were not CPAs that contain the errors I listed above (and others more egregious). Remember, that you sign your name at the bottom of that return. The IRS doesn't care if you relied on a bookkeeper who gave you bad advice. If you are uncertain about the tax preparers qualification, ask the person who you are considering giving your business to if he or she is a CPA. A CPA (certified public accountant) is licensed by the state, has to complete annual continuing education each year, and can lose his or her ability to file returns if he or she screws up. Got complicated issues? It's worth the money to find someone who is liable for the advice he or she gives you.
Part of my job as a bankruptcy attorney is cleaning up tax problems from years past. Got questions--call me Attorney Shannon McDuffie for your consultation. (404) 418-8879