Being careful is import when completing your taxes and this year should make you a little bit nervous if you are preparing your taxes yourself. Even professionals are making a lot of mistakes according to the Government Accountability Office.
In a study done in 2014, 10% of preparers did not calculate a normal tax return correctly. The final error rates for tax preparation according to the study was 50% for self-prepared returns and 60% for professionally prepared returns. Of course, the professionals more than likely handle the tough returns. Still, those are alarming numbers.
Some errors are obvious mistakes while others are harder to deduct, keep these difficult areas in mind this tax season: foreign investments, charitable giving, real estate taxes, gambling winnings, and state refunds.
If you have foreign investment accounts or savings accounts, make sure to report them to the IRS. If the IRS is able to discover the account later, you can face a penalty up to $10,000.
When making contributions to charity, keep a record so you can prove that you gave to a qualified charity. And when purchasing an item for a charity event, you can only deduct the portion above the value you are receiving.
Real Estate taxes can be a trick if you just purchased the home as some are paid on the closing statement. And an office in the home is a great deduction, but make sure not to claim more space than the office occupies.
If you have gambling winnings during the year, offset those winnings with loses you experienced and documented. You can’t take a lose of gambling, but limiting the amount of your winnings that is taxable is really nice.
Finally state refunds. State refunds on tax return filings are taxable the next year as income on the federal return. Yet federal tax refunds are not taxable, you get to keep the full amount of those funds.