Taxpayers have only a few days left before the April 15 deadline to file their income tax returns or request an extension with the Internal Revenue Service. “Review twice, file once” would be a good saying for tax returns, because any mistake could lead to problems down the road.
The reality is that even a careful review will not catch some of the mistakes made by taxpayers and even some inexperienced tax preparers who do not know all the complex rules. Listed below are just three things to watch out for when reviewing a 2014 tax return, and ones you should get some help with when filing.
- Charitable deductions: Donations of many types are deductible on a tax return, but there are many rules. When someone gives clothes or furniture away to Goodwill, they need to get a receipt and should write down the items that they donated. They can only donate the value of the items at the time they donated them, not when they purchased them. Goodwill and other charitable organizations have an online pricing guide to help. Taxpayers should have any property worth more than $5,000 independently appraised with written documentation.
- Health care forms: The Affordable Care Act requires that everyone have health care. The penalties are severe for those who don’t, but there are some exceptions. Form 8965 is for people who are exempt from the ACA requirements. Form 8962 is for those who claim a tax credit for insurance purchased through the online marketplace. If someone used this form last year, he or she could owe money concerning last year’s taxes if they earned income above the expected threshold.
- State-tax refunds: Whether or not your New York state refund from last year will be considered taxable income depends on the deductions you took last year. Standard deduction generally means no tax. Itemized deductions mean partial or fully taxable income, and the state reports this information to the IRS.
The IRS conducts tax audits when officials find anything in a return that looks suspicious. If they find a mistake, even an innocent one, the taxpayer could be liable for back taxes, interest and penalties. Most people don’t know they made a mistake until they receive a notice from the IRS. The moment that happens is the moment they should consult with a tax attorney.