CHECKLIST: 46 Avoidable Tax-Filing Errors – If Clients Only Knew

Tax Season Checklists: Learn More

Here's a handy checklist to share with clients.

By Ed Mendlowitz
Tax Season Checklists

Taxes are hard enough without making avoidable errors. Before clients file, they should double check to make sure they don't make these errors. We often hand out this checklist to clients to avoid mistakes in advance.

  1. Not signing the return (if you file paper copies)
  2. Number transposition and spelling errors
  3. Unchecked or unanswered questions
  4. Entering incorrect or unpaid estimated tax payments
  5. Missing pages in a paper filed return
  6. Not correcting reason for a tax notice for a prior year, on this year’s return, if there is a continuing issue
  7. Underpaying or overpaying [Ugh!!!] the tax due
  8. Sending your tax check or making out the check to the wrong tax agency
  9. Not calculating underpayment penalty (on Form 2210), if applicable
  10. Not calculating a penalty on an early withdrawal from a retirement or IRA account
  11. Calculating a penalty on a permissible early withdrawal from a retirement account
  12. Paying tax and penalty on IRA distributions that were timely rolled over to another IRA account
  13. Not calculating a penalty if you took more than one 60-day tax-free rollover in a 365-day period
  14. Not filing Form 5329 (Additional Taxes on Qualified Plans Including IRAs and Other Tax-Favored Accounts) when it was required and if being filed separately from tax return, it must be signed
  15. Not calculating self-employment tax on freelance income or commissions
  16. Information from K-1 schedules entered incorrectly or withholding tax on those forms not properly claimed as a tax payment credit
  17. Responding to an email notice from a tax agency – they do not send emails. You received spam.
  18. Your paid preparer did not sign your return or enter their ID number.
  19. Claiming the wrong exemptions or omitting a correct Social Security number
  20. Claiming an exemption for someone who properly can claim themselves (this can occur when a dependent marries during the year and files a joint return; or no longer qualifies as a dependent such as because of excessive income and/or is not a student for at least five months of the year or is a student and over age 24 at end of the year; or a child you support where your ex-spouse is entitled to the exemption under a divorce agreement)
  21. Omitting a Social Security number for someone you paid alimony to
  22. Not itemizing deductions when you should have
  23. Claiming excessive home mortgage interest deductions is a red flag. Interest on home mortgages over $1,100,000 is not deductible.
  24. Deducting points in full on refinanced mortgages, instead of amortizing them
  25. Reporting mortgage interest and real estate taxes on rental properties as itemized deductions
  26. Not claiming investment interest costs properly and not being aware of limitations or interest tracing rules
  27. Omitting or reporting incorrect state tax payments and withholdings as an itemized deduction
  28. Reporting deductions that stretch the imagination, e.g. someone with high debt indicated by a high mortgage and extensive home equity loan interest (not reportable) usually won’t be making cash charitable contributions equal to 16 percent of their gross income
  29. Not properly picking up carry forward expenses or credits from the prior year’s return. This includes charitable contributions, investment interest expense, net operating loss deductions, capital losses, suspended losses from passive activities, alternative minimum tax credits and foreign tax paid credit.
  30. Reporting as income the state tax refund you received and that was reported on a 1099 when you did not get a full deduction for that on your prior year’s return because you claimed the standard deduction or all or part of the payments were “disallowed” because you were subject to the alternative minimum tax
  31. Not correctly answering foreign account questions on bottom of Schedule B especially when Schedule B is not otherwise required to be filed and then not filing the FBAR FinCEN Form 114
  32. Overstating charitable contributions or deducting contributions you did not make, or overvaluing non cash contributions
  33. Not having proper charitable contribution receipts in your possession when you file your return claiming those deductions
  34. If you made non-cash contributions over $500 additional forms must be attached to your return
  35. Not having a certified appraisal if you made a gift of tangible property over $5,000. The entire contribution can be disallowed because of this.
  36. If your income is sufficiently high, not adding the 3.8 percent tax on net investment income or the .9 percent tax on earned income
  37. If you were a “real estate professional” who did not claim yourself as such you possibly subjected yourself to the tax on net investment income
  38. Reporting incorrect cost basis on sales of capital assets. This is common with inherited stocks, stocks received as a gift, or with dividend reinvestment account accumulations or where you had a previous wash sale.
  39. Not treating wash sales properly. If you have a wash sale, any losses are not deductible but increase the basis of the purchased shares that caused the wash sale.
  40. Reporting gross sales from brokerage transactions that are less than the amounts reported on the 1099s issued by your brokers
  41. Not reporting proper basis on employer stock sales that were also reported as income on your W-2 form
  42. Self-correcting and reporting the “correct” amount where you received an incorrect 1099 (and cannot get a corrected 1099 in time to file your return). You should report on your return the amount on the 1099, even if it is wrong, and subtract as an adjustment on another line (e.g. line 21) so the net amount is the proper income you received
  43. Omitting allowable IRA, Roth IRA, SEP or other retirement plan contributions
  44. Omitting paying payroll taxes on your individual tax return for household employees
  45. You should self-check your return by a line-by-line comparison to last year’s return and understand large or illogical differences.
  46. Inputting incorrect bank account numbers and information for your tax payment or refund
  47. And… make sure you e-file or mail your return by the April 18, 2017 due date!

 

2 Responses to “CHECKLIST: 46 Avoidable Tax-Filing Errors – If Clients Only Knew”

  1. Terry Eyberg

    If you received a gift from a foreign person that was paid out of a US account and exceeded the threshold, not filing Form 3520 to report the gift.

    Not reporting PFICs on your return even if there were no distributions/sales
    Not making “QEF” election in the first year the investment is a PFIC in your hands as a US person (a pedigree QEF)

    Not paying close attention to attribution rules to see if Form 5471 must be filed

    Gift tax related-did you exceed your annual exclusion amount or superannual exclusion amount in case of gifts to non-citizen spouse? Must file gift tax and possibly incur gift tax. If non-resident aliens purchase US real estate, be careful how they take title to the property as they may create a gift tax when they sell it (i.e. husband purchases home as joint tenants with right of survivorship and sells it later). He deposits the proceeds into a joint account with his wife but he made all the mortgage payments. He has made a gift to his wife and has no gift tax credit to offset the gift tax liability.

    Reply
  2. Robin Johnson

    I love this checklist – I keep telling my clients and I send them letters all the time – maybe your brilliance will drive it home. Thank you

    Reply

Leave a Reply