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Preparing your tax return is anything but fun, and it’s rarely easy. Play it safe: do not send your return to the IRS, without checking to make sure that you haven’t made one of these all too common errors:
Math Error
This is one of the easiest mistakes to make: adding or subtracting incorrectly on your tax form(s). Don’t rush – being in a hurry to get it in by April 15th can cause mistakes. Be sure to review everything you enter for correctness.
You should get help with past Unfiled Returns before filing.
Computation Error
Make sure that you have reported your tax correctly. To accurately compute your tax, you must have computed both your Adjusted Gross Income and Taxable Income directly: be sure that they are right. Credits and payments are often computed incorrectly, as well, so pay extra attention to your withholding and Estimated Tax Payments, the Earned Income Credit, your child and dependent care credits, and education credits. If any of these are incorrect or you have claimed too much, the IRS will adjust them for you.
Missing and/or Incorrect Social Security Numbers
If you leave your, a spouse’s, or a dependent’s Social Security Number (or other type of Identification Number) blank, the IRS will not accept your return until it has been reported-and they could charge you a penalty for leaving it off. Just as important, make sure that you enter the number exactly as it appears on the Social Security card-a mismatched Social Security Number will delay processing of your return as well.
Selecting the Wrong Filing Status
There are five filing statuses that you can select from on Form 1040: you must choose one that applies to your situation. Most people incorrectly file as Head of Household, when they should really file as Married Filing Separate. If you qualify for more than one filing status—prepare a return with each filing status and use the one that gives you the lowest tax.
Omitting Forms and/or Schedules
If a form or schedule is required to report income and/or expenses, be sure to include it with your return. The IRS will not process your return until all of the needed forms and schedules are turned in, completed. Make sure everything that needs to be sent with your return is included.
Omitting Income
If you file a return that does not match the income records at the IRS, the IRS will adjust your tax for you, and issue a penalty for 20% of the difference. Even if you won’t get a 1009-MISC or W-2, if you know you had income, you must report it. If you don’t have your records, or won’t have them in time for April 15th, file an extension, so that you can file a return when you are sure that you have everything you need for an accurate return.
Incorrect Account Number for Direct Deposit of Your Refund
If you enter an incomplete routing or account number, it will cause you to receive a paper check from the IRS, not a direct deposit into your bank account. If you enter the wrong number and your financial institution accepts the transfer from the IRS, someone else will receive your refund! Make sure that you have entered your account and routing numbers correctly!
Forgetting to Sign and Date Your Return
This may seem simple enough, but people send their return in without signing it! You MUST sign and date your return when you mail it in to the IRS. If you are filing a joint return, both husband and wife need to sign the return.
Filing Late Without an Extension
The IRS wants you to file your return on time—they even grant you a six-month extension if you need it, no questions asked. If you do, make sure you file your return by October 15th-there are no additional extensions.
Solutions for Tax Problems.
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Tags: Unfiled Tax Returns
Posted in Taxes · April 7th, 2010 · Comments (0)
18% of people are categorized incorrectly… and the cost of being wrong can be pretty high!
There is a big difference between an employee and an independent contractor when it comes to federal taxes. If you are incorrectly categorized as an independent contractor when you are actually an employee, you could pay a lot more on April 15th. Find out below and find out more at irs.gov.
Employees
As an employee, your employer pays half of your FICA and Medicare tax. You pay 7.65% and your employer pays 7.65%.
As for federal income taxes, most employees elect to have their employers withhold tax from their pay on Form W-4.
Independent Contractors
As an independent contractor you pay the entire 15.3% of FICA and Medicare tax (referred to as “self-employment tax”).
In addition, independent contractors do not have pay automatically withheld for federal income taxes. They make federal income tax payments , or Estimated Tax Payments by sending in Form 1040ES.
Am I an Employee or Independent Contractor?
The biggest factor in determining if you are an employee or an independent contractor is who has the control of the result of your work: you or someone you are working for? If you have the majority of control, you are most likely an independent contractor. However, if the organization (or person) that you are working for has the majority of control, you are most likely an employee.
The IRS specifically looks at the following three areas of control for determining a worker’s classification. Here are how some of the factors could be applied to these areas:
Behavioral Control – if someone else controls what work will be done and how the work will be done, you are most likely their employee. If you receive direct instructions from someone else concerning your work, such as when, where, and how to do the work; what tools or equipment to use; or where to purchase supplies and services, you are most likely an employee.
Financial Control – if you have a significant financial investment in the work you perform (including assets or tools you need to complete the job), you are most likely an independent contractor. If you are responsible for purchasing the tools and materials needed to complete your job, you are most likely an independent contractor. If you will personally realize either a profit or a loss, then you are probably an independent contractor.
Type of Relationship – if you receive benefits (such as health insurance, retirement plans, or paid leave) from the person or organization you work for, then you are most likely an employee. There may even be a written contract that details the nature of your working relationship, i.e. employer and employee or an explicit statement that you are an independent contractor.
What Does it Mean to be Classified as an Independent Contractor?
If you are an employee and you are incorrectly being treated as an independent contractor, your tax bill is going to be much larger than expected. On top of being responsible for the entire amount of FICA and Medicare tax AND having no withholding, you will also be assessed an Estimated Tax Penalty for failing to properly make your estimated tax payments (even though you may not know you needed to make them). Or have unfiled tax returns.
What Do I Do if I Am Not Sure About my Current Classification, or If I Disagree with My Current Classification?
The IRS will issue a determination for you if you either disagree with your current classification or cannot decide which is the correct classification for you. You will need to file Form SS-8 with the IRS, in order for them to make a determination on your behalf. Once you submit the form, the IRS may ask for additional information from both you and whomever you worked for. A technician will be assigned to the case and will make a determination based on the facts of the situation and the law.
It could possibly take six months or more for the technician to make the determination – so don’t expect a quick turnaround time. While you are waiting for a decision, you can file Form 8919 with your federal income tax return, in order to pay your half of the FICA and Medicare taxes.
If you do not agree with the decision of the IRS, you cannot appeal; however, you can request that the office reconsider the decision if you have additional information that was not previously included.
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Tags: Unfiled Tax Returns
Posted in Taxes · March 8th, 2010 · Comments (0)