It’s tax time and by now you’ve probably collected a pile of tax forms and receipts for preparing your return. If you are planning to prepare your own return this year, watch out for the biggest at-home tax filing mistakes – and take the extra time to file your return correctly.
Misspelled Names & Wrong Social Security Numbers
Before you start to enter income and deductions, make sure your name and social security number are correct. Missing information or misspellings can lead to rejected returns and delayed refunds.
If you’re recently married or divorced but haven’t yet registered your name change with the Social Security Administration, you’ll need to file under your old name. The name on your return must match the name listed on Social Security records.
Wrongly Claiming the Home Office Deduction – Or Wrongly Missing Out
The home office deduction trips up a lot of taxpayers. Having an office in your home does not necessarily entitle you to a deduction. To deduct home office expenses, you must use the area exclusively and on a regular basis, either as a principal place of business or a setting to meet with clients or customers.
If you are an employee but do some work from home, you can claim the deduction only if you work at home for the convenience of your employer. You don’t qualify if you work all day at the office and bring home some more work at night, but if your employer doesn’t provide an office for you, you can take a deduction.
If you do meet the qualifications to claim the home office deduction, don’t avoid it just because you’ve heard it can trigger an IRS audit. Although the IRS does not share details on how it selects targets for audits, most tax professionals agree that with the way people work today, the home office is no longer a red flag.
Inflating the Value of Non-Cash Donations
Over the last few years, the IRS has tightened the screws on non-cash donations, which were rife with inflated values and bogus deductions. For donations of non-cash items worth less than $250, you need a receipt from the charity and you need to have that receipt in hand by the time you file your return. For items worth $250 to $5,000, you need contemporaneous written acknowledgement from the charity includes a description of the property and whether the organization provided any goods or services in exchange for the gift. To claim a deduction for a noncash contribution or more than $5,000, you will need a qualified appraisal.
Your deduction will be limited to the fair market value (FMV) or the item you contribute at the time it was donated. FMV is the price that the property would sell for on the open market. For instance, if you donate used clothing to Goodwill, the FMV would be the price that a typical buyer would pay for clothing of that age, condition, and style. Usually, the FMV will be far less than what you paid for it.
You cannot take a deduction for donated used clothing or household goods unless they are in good used condition or better. Many charities that accept such donations publish valuation guides, which can be helpful in determining FMV.
Overlooking Donations Made Online
There has been a big increase in online giving in the last several years, but many people forget to save online receipts for tax time. Before you file, search your inbox for keywords such as “gift” and “donation.” You may just donate $20 here or $40 there, but those relatively small amounts add up over the course of a year.
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