When it comes to taxes, most of us make errors. It's not our fault; the system is ridiculously complicated. Some errors are made when preparing the tax return. Others errors are made long before that time by not taking the steps that would have reduced taxes. Yet taken together, these two types of errors can add up to significant lost financial opportunity over a lifetime. This short list of the most common errors was distilled from several sources that report on the observations of financial advisers who review tax returns prepared by others.
Most common tax filing errors:
1) itemized deductions
2) rental property deductions
3) cost basis of investments
Tax advisers suggest that everyone should have their tax return reviewed by a person other than the person who prepared it. That review can be completed at any time, but it is clear that the sooner the better in terms of options that will be available if changes are justified. While most reviews result in either the discovery of an error / oversight OR an alternate possible approach to reporting the same transactions. Not all reviews result in a recommendation to amend the return; in fact this occurs in only a few returns where the change justifies the cost and risks of amending.
I publish a number of free online checklists designed to point out opportunities to save taxes (see the home page or the publications index). Each option that is possible has a unique cost and a benefit to be considered. An easy way to develop a list of tax planning possibilities is to schedule an individual tax planning review.
Recognize that tax return preparation is completely distinct from tax planning. Don't assume that a CPA or tax preparer is necessarily a good source of tax planning strategy simply because the topic may come up in conversation about your tax return. It pays to treat the two separately and seek out a tax planning professional.
Most common tax planning oversights:
Opinions expressed are the solely those of the author and do not represent the position of any other person, company or entity mentioned in the article. Information is from sources believed to be reliable but cannot be guaranteed. Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues or a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. Tony Novak operates as an independent adviser under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator" but is not a representative, agent, broker, producer or navigator for any securities broker dealer firm, federal or state health insurance marketplace or qualified health plan carrier. He has no financial position in any stocks mentioned. Novak does work as an accountant, agent, adviser, writer, consultant, marketer, reviewer, endorser, producer, lead generator or referrer to other companies including the companies listed in the articles on this web site.