10 Things You Definitely Should Not Do on Your Taxes
So, you think you're ready to file your taxes, huh? Well, not so fast.
Preparing your yearly return is no simple chore, but, luckily there are some tips you can use to make the process a whole lot easier:
File Late (or not at all)
The failure to file fine is generally greater than the failure to pay fine, so even if you're not ready to write a check to the government, you can file your taxes. The amount that you owe if you file late will increase each month, so don't waste any time filling out those forms.
Take Deductions for Hobbies
You may love fishing, but if you're not making your living from it, you can't deduct your rod and reel. Deductions are only allowed for business activities. According to the IRS, endeavors that made a profit in three out of the last five years can be considered for-profit and can then qualify for deductions.
make Oversized Charitable Donations
Giving to charity is important and getting tax credit for it may be equally so. However, deductions that seem large compared to your income may be a red flag for the IRS. The government lets you deduct up to half of your adjusted gross income, but be aware that particularly large write-offs may put you on the short list for an audit.
Deduct Your Work Clothes
Your job demands that you show up in a suit and tie, so it seems like those jackets and loafers would surely be a deductible business expense, right? Unfortunately, they're not. Unless your work demands that you wear a uniform that you would not otherwise wear in public, the IRS has no pity for all the work clothes you bought this past year.
Hire Just Anyone To Prepare Your Taxes
You may think that having your taxes filed by an expert would be the smart thing to do, but be careful who you select. While most tax preparers are qualified and honest, there's always a bad apple, like New York's Howard Levine. Mr. Levine altered the tax returns that he prepared for his clients so they claimed fake deductions and false numbers, in order to milk the system and receive bigger checks.
FAIL TO Report Gambling Wins
You went to Vegas, you got lucky and what happened in Vegas definitely didn't stay there. If you're one of the lucky few who came home with fuller pockets, don't expect to spend all that money in one place. You'll need to put some aside for your taxes. If the win is large enough, the payer will be sure to get your information and will likely then report your winnings. The IRS is going to be on the lookout to make sure that you report it, too.
Ignore The Gift Tax
Remember when Oprah gave everyone in her audience a car? That's a pretty amazing gift to receive -- until tax time, that is. As the gift giver, Oprah had to report those vehicles, and each of the audience members could have been liable to pay taxes if they sold the cars, because the value of each one was over the IRS' lucky number: $13,000. So, if you're hoping to give that special someone some jewelry or new electronics this year, hunt for a gift that costs a maximum of $12,999 or else sharpen your pencil and be prepared to tell the IRS all about it.
Round All Your Numbers
It's pretty rare to make a purchase or a payment that's exactly $100. When a person has all of their receipts and back-up information, the numbers on a tax form are likely to end in odd numbers and maybe even have some change. If all of your numbers end in tidy zeros, the IRS might get suspicious and flag you for an audit.
don't Pay Taxes on Unemployment
Think just because you don't have a job the IRS can't get you? Not true. If you're receiving unemployment payments, you do owe money. Not to be the bearer of bad news, but unemployment compensation is treated as income and therefore it is taxable.
Mail Them To The Wrong Place
You kept all your receipts, put in all that work, double-checked your entries only to put the wrong address on the envelope? Don't let it happen to you. Use this IRS reference guide to make sure that your tax return gets there and breathe a sigh of relief until 2013.