None of us are perfect and we all make mistakes. Many mistakes are made simply due to insufficient information, or information not easily understood. Here I’ll explain the 3 most common mistakes we see on self-prepared tax returns. They are marital status, business deductions, and kids with jobs.
Marital status:
Your marital status for federal income tax purposes is determined for the entire year, on December 31. You may have been single for 10 months of the year and then married in November, or married for the first 8 months and divorced in August. You are either single, or married, on Dec 31. One can always choose to file ‘married filing separate’, but that is different than ‘single’ – there are different rules that apply for certain things, and state law can affect how married filing separate is treated.
There does exist an exception to be ‘treated’ as unmarried (allowing you to file head of household or single even though legally married), but this is for those who have been separated for at least the last 6 months of the tax year. This exception is not commonly met, and you are free to ignore that part of this information. If you just got married, you cannot be treated as unmarried.
Business deductions:
Finding a place to deduct an expense does not mean it is a qualified business deduction for you. Form Schedule C is where someone would report their business income and expenses before electing to be taxed as a corporation. The form is a standardized form with places for various deductions that apply. Often we see something like ‘utilities’ filled in for someone with a home based business, and they simply enter their entire utility bill into the field. What is required to deduct the appropriate portion of utilities, mortgage interest, or any other part business part personal use takes a bit of extra effort and research. While that can be accomplished by someone with determination, we recommend that you find a professional to prepare your tax return and help educate you about how it is all reported at least once.
It applies to all the fields present for business deductions. There may be a place for you to enter the expense, but it is not a simple plug and play form. One can read the instructions for the Form Schedule C which will identify most items one by one, but be ready for some boring reading!
Kids with jobs:
It is a sore subject for a parent when their young adult child whom is still a dependent filed their tax return very quickly for their refund, but accidently forgot the box that says they are a dependent – thus disallowing the parent(s) from claiming them or their college expenses. If your child files a return before you file your tax return please double and triple check that they checked the box which indicates they are a dependent of another taxpayer (you).
The way it actually reads on the tax return (the 2017 Form 1040EZ) is ‘If someone can claim you as a dependent, check the applicable box’ and there is a box marked ‘You’. That box must be checked. If it is not checked, they are unable to be claimed as a dependent. It can be corrected, but it takes extra time and money to do so. Additionally, if the person is in college and you are paying for it – only claiming them as a dependent allows you to claim the college expenses on your tax return. If your child mistakenly did not check the box, not only can you not claim them, but you are losing potentially thousands of dollars of education tax credits as well. Due to this, we often advise parents to not let their children file a tax return until the parents return is filed and complete. It is much easier to correct one check box on the child’s return and resend it to the IRS, than have to go through and amend the child’s return which has to be filed on paper and takes the IRS 90+ days to process.
Charles Steinmetz
Senior Tax Professional
