Thursday, March 18, 2010

Avoiding tax errors

The IRS has just sent out a directive (Tip 2010-52) that points out the following errors to avoid during this tax season. Any one of these errors may impede the processing of your tax return and delay the receipt of your refund.

Your tax professional should already be aware of the errors and should have already incorporated steps to ward off such errors. None the less we are human, and sometimes errors happen. If you are doing your taxes yourself, please be aware of the following common errors.

1) Incorrect or missing social security numbers. Because of e-filing, the missing social security number is usually never an issue. Without a ss # the return would never be allowed to be transmitted. With an incorrect ss#, the return can be submitted, but would result in a reject, and an additional fee for re-transmittal.

2) Incorrect or misspelling of dependent’s last name. You must review your tax return (if you can) before it is transmitted. If you are with your preparer at the time of processing, they should be asking you to review your return, before the transmitt, or concluding of your appointment.

3) Filing status. Make sure the correct filing status has been used for your situation. You may fall into more than one status, but your preparer should use the filing staus that results in the best benefit for you.

4) Math errors. This usually happens when a preparer or tax payer are processing taxes by hand and not using a professional electronic system; none the less, a math error can and will delay your receipt of a refund if you are due one.

5) Computation errors. Same deal here. If you are manually processing your tax return, or your tax practitioner is, this could be a costly error. A computation error is when one looks at and uses the wrong figures from the tax table, W2s, EIC tables...or any documents, or tables used where figures need to be entered.

6) Incorrect bank account numbers for Direct Deposit. Make sure you and or your practioner are looking at your check while entering your bank account information (that's if the refund is to be deposited into your checking account). Your refund can be deposited into your savings account or money market as well. Transmitting the incorrect information will cause a reject by your banking institution, which delays the receipt of your refund.

7) Forgetting to sign and date the return. Any paper return must be signed by the taxpayers. In the case of married filing jointly, both spouses must sign.

8) Incorrect Adjusted Gross Income information. When an individual (taxpayer) transmits their own return (files electronically), they need to have a pin # (personal identification number), and inorder to sign electronically, you need to know your exact AGI (Adjusted Gross Income), from the prior tax year. This is done to ensure your identity.

9) Claiming the Making Work Pay Tax Credit.....This is the exact wording of the IRS...Taxpayers with earned income should claim the Making Work Pay Tax Credit by attaching a Schedule M, Making Work Pay and Government Retiree Credits to their 2009 Form 1040 or 1040 A. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit. The credit is worth up to $400 for individuals and $800 for married couples filing jointly. Many people who worked during 2009 are slowing down the processing of their tax return by not properly claiming this credit.

As always....
Always affordable tax preparation, always free efile and direct deposit.
I look forward to being your tax professional.

Your questions are always welcomed.

Blessings Always
Wanda E Green (Uigei)

Tuesday, March 2, 2010

Advanced Earned Income Tax Credit

We've already gone over the "Earned Income Tax Credit" (EIC), but now we are going to go yet a step further. Most of us who qualify for the EIC receive it all at one time when we file our taxes. For many, they can qualify to get a portion of this credit during the year in their paychecks...hence the "advanced" in the name.

The first thing is to determine eligibility. You must be expecting to be eligible for EIC, and you must have a qualifying child*. Your earned income must be less than $35,535 (40,545 if you are married filing jointly). Your wages must be subject to federal income tax, social security tax, and medicare tax withholding.
*Qualifying children must meet age, residency, relationship, and joint return test.

If you are married filing jointly, both you and your spouse can receive the advanced credit with the proper document filing with your employers. All rules must still be met. You each would file a W-5 with your employer (HR), for the respective years that you want to receive the advance. If you have more than one employer, only give the W-5 to one employer. The certificate (W-5) is good for one tax year only. You must re-file a W-5 with your employer for each tax year that you want to receive the advance. you've filed, and you've started to receive a little extra with every paycheck; you must file a tax return to declare that you have received that money for that tax season. Your employer will include the advance amount on your W-2 in box 9. You must file a 1040, or a 1040 A....1040EZ is not allowed.

If at anytime during the year your situation changes in regards to household and children and you are no longer eligible to receive the AEIC (Advanced Earned Income Tax Credit), you must file another W-5 and check the appropriate box 1 and turn it in to your employer (HR).

I know this information will help many, many of you. Call for assistance if you need to.

I look forward to being your tax professional. Always affordable tax preparation, always free efile and direct deposit.

Blessings and Prosperity
Wanda E. Green (Uigei)