| Subscribe# | Unsubscribe# | Forward to a friend 
Oops! Errors to Avoid at Tax Time
9 Mistakes You Can Avoid
Avoiding tax errorsErrors made on tax returns may delay the processing of your tax return, which in turn, may cause your refund to arrive later. Here are nine common errors the IRS wants you to avoid to help guarantee your refund arrives on time.

Incorrect or missing Social Security Numbers. When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards.

Incorrect or misspelling of dependent’s last name. When entering a dependent’s last name on your tax return, ensure they are entered exactly as they appear on their Social Security card.

Filing status errors. Make sure you choose the correct filing status for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) With Dependent Child. See Publication 501, Exemptions, Standard Deduction, and Filing Information to determine the filing status that best fits your needs.

Math errors. When preparing paper returns, review all math for accuracy. Remember, when you file electronically, the software takes care of the math for you!

Computation errors. Take your time. Many taxpayers make mistakes when figuring their taxable income, withholding and estimated tax payments, Earned Income Tax Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits, and the Child and Dependent Care Credit.

Incorrect bank account numbers for Direct Deposit. If you are due a refund and requested direct deposit, be sure to review the routing and account numbers for your financial institution.

Forgetting to sign and date the return. An unsigned tax return is like an unsigned check – it is invalid.

Incorrect Adjusted Gross Income information. Taxpayers filing electronically must sign the return electronically using a Personal Identification Number. To verify their identity, taxpayers will be prompted to enter their AGI from their originally filed 2008 federal income tax return or their prior year PIN if they used one to file electronically last year. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS.

Claiming the Making Work Pay Tax Credit. 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.
Don't let taxes stress youFive Tips to Avoid Tax Time Stress
Filing your tax return doesn’t have to be stressful. The IRS has put together five stress-relieving tips to help you.

ONE: Don’t Procrastinate. Resist the temptation to put off your taxes until the very last minute. Rushing to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error.

TWO. Visit the IRS Website. In 2009, more than 296 million visits were made to Make 1040 Central your first stop to learn the latest news and find answers to your questions.

THREE: File Your Return Electronically. Last year, two out of three tax returns were filed electronically. More than 800 million tax returns have been processed safely and securely over the past 20 years. Use e-file and direct deposit to get your refund in as few as10 days. E-filed returns have a much lower error rate. Taxpayers receive a fast acknowledgement that the IRS received the return, a service not available to paper filers. You can e-file through your tax preparer or commercial software.

FOUR: Don’t Panic if You Can’t Pay. If you cannot pay the full amount of taxes you owe by the April 15th deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You should also contact the IRS to discuss your payment options at 1-800-829-1040. The agency may be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer in compromise.

FIVE: Request an Extension of Time to File – But Pay on Time. If the April 15 clock runs out, you can get an automatic six-month extension of time to file until October 15. However, this extension of time to file does not give you more time to pay any taxes due. If you have not paid at least 90 percent of the total tax due by the April deadline you may also be subject to an Estimated Tax Penalty. To obtain an extension, just file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.

Articles reprinted courtesy of US Internal Revenue Service

MARCH 2010


About Tax Legend
TaxLegend201 is an affiliate of Drake Software, used by more than 30,000 tax professionals each year. With our service, you are assured of a competent, cost-effective analysis. Our goal is to not only save you money, but help you keep your money!

TaxLegend201 offers convenient and cost-effective tax preparation services. Take advantage of our conversion services for most 1040 tax programs, including Intellitax™ (both DOS and Windows), Lacerte®, ProSeries®, MAX®, TaxWise®, TaxWorks®, UltraTax®, TaxSlayer Pro®, Crosslink®, ProSystem FX®, TaxSimple®, GreatTax™ and TaxAct®. We also provide data conversion software for MAX®, ProSystem FX®, TaxWorks®, GreatTax™, TaxWise®, UltraTax®, Lacerte® and ProSeries®' 1065, 1120 and 1120S programs. 

If you need a tax preparation software program that stands out from the rest, look no further than TaxLegend201. Our software is backed by an experienced team of programmers, tax analysts, CPAs and EAs. It's easy to understand why thousands of preparers trust it year after year. 

Things You Should Know about Penalties

The tax filing deadline is approaching. If you don’t file your return and pay your tax by the due date you may have to pay a penalty.

If you do not file by the deadline, you might face a failure-to-file penalty.

If you do not pay by the due date, you could face a failure-to-pay penalty.

The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.

The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.

If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty if you file by the extended due date and pay the remaining balance with your return.

If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect. 

TaxLegend, 2056 Headland Drive, Atlanta, GA 30344.

To ensure you receive our monthly newsletter, make sure you add manager@taxlegend201 to your address book.