COMMON TAX ERRORS
1. If you had a baby during 2011, you must get a Social Security number for the child before filing your tax return. You will not be able to claim a child dependency exemption, child tax credit or earned income credit without a valid Social Security number.
2. If you receive a notice from IRS, do not assume that it is correct and automatically pay the amount shown on the notice. Many IRS notices just require you to give the additional information to show why you do not owe the additional tax and penalty.
3. You are required to receive a minimum distribution from your IRA or SIMPLE IRA when you reach the age 70 1/2. If your distribution is less than the minimum required distribution, an excise tax may be imposed on the shortfall. The minimum distribution requirement does not apply to Roth IRA’s.
4. If you are younger than 59 1/2, think twice before you take an early distribution from your 401K or IRA. A 10% early distribution penalty is charged in addition to federal and state tax on the distribution. A large distribution will result in a higher tax bracket on the distribution and the regular income.
5. A custodial parent who has released the right to claim their child as a dependent to their ex-spouse still has the right to claim head of household status, the earned income credit, and dependent care credit.
6. Make sure that your tax return numbers match the 1099’s you receive from all sources such as employer, investment companies or broker. The IRS now matches what’s on your tax return with what is shown on the 1099’s.
7. If you cannot complete and file your tax return by the April 15th deadline, you must file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return by the due date for filing your calendar year return (usually April 15) or fiscal year return. This form is also availableen español. File for an extension to avoid an additional charge of 5% a month. Even if you do not have the money to pay the due taxes by April 15th, an extension without any payment would avoid the large 5% filing penalty and you will only have to pay the much smaller late payment penalty.