For Mark Roberts’ Use: Have you filed your income taxes yet? Many of you wait until the last minute (April 17) to do so. And that’s understandable, because no one enjoys doing their taxes! But if you’re still working on this chore, we wanted to remind you of a few common errors that could cost you money.
“I shouldn’t file my return until I can pay the amount due.” The penalty for filing late is greater than the penalty for failing to pay what you owe. So in other words, you’ll usually pay less in penalties if you go ahead and file now, but wait to pay the taxes due. The IRS offers installment arrangements and short-term extensions on the amount due, and occasionally even waives the penalty. Check with your tax professional for more information on these provisions.
“Married couples should always file jointly.” This is not always true. Sometimes it is beneficial to file your tax returns separately. Sometimes the savings are at the state level, rather than the federal, so check on that as well. Run the numbers both ways, and then choose the most beneficial filing status.
“My kids are over 18, so I don’t have any dependent deductions.” Actually, if you provide more than 50 percent of their support, or support an elderly relative, you might be able to claim them as a dependent. This can be true even if they don’t live with you! This situation is common for those who have disabled relatives. But, check with a tax professional to be sure your situation qualifies.
“Cancelled checks are sufficient proof of a charitable donation.” Actually, if the gift totaled more than 250 dollars, the IRS requires a donor acknowledgement letter that describes the donation as well as anything you received in return. Charitable donations can make terrific tax deductions, but utilize them according to IRS rules. Otherwise you could lose the deduction if you’re audited, and end up owing more to the IRS (along with penalties).
Keep in mind that for the purposes of a blog, this advice is quite generalized. Considering how complicated taxes can be, we urge you to consult with a professional before deciding how any of these examples affect you personally. And, as always, give us a call if you have questions regarding financial planning. Planning should be ongoing throughout the year, so that you don’t have to rush and make mistakes when under pressure. That rule applies to taxes or anything else related to your money.