What Tax Experts Tell You Not to Do On Your Taxes

Doing your taxes can be stressful enough without you making things worse.

And odds are good that if you aren’t careful this year, you will make a mistake, or a lot of them, on your taxes. In a study released last year by the Government Accountability Office, only 2 out of 19 tax preparers surveyed in undercover site visits calculated the correct refund amount. One preparer calculated that a taxpayer was due $3,718 more than he or she was supposed to receive.

Overall, preparer-filed returns showed an error rate of 60 percent, while self-prepared returns showed a 50 percent error rate, according to the GAO.

Of course, there are innumerable things that could go wrong when you file your taxes. You could put down the wrong Social Security number or take deductions you aren’t entitled to. But many mistakes aren’t quite so obvious. So when you’re doing your taxes this year, keep in mind these common reasons errors get made.

Charitable contributions. It seems easy enough. You donate money to a good cause, you get a tax deduction. Not so fast.

“You should also be sure you have accurate records of the donations and confirm that the recipient is a qualified charity,” says Ben Sullivan, a certified financial planner with Palisades Hudson Financial Group in Scarsdale, New York. He is also an enrolled agent, which means he is federally authorized to represent taxpayers before the IRS, such as during an audit. It’s a big deal in tax preparation circles.

Moreover, Sullivan says, “Donations to businesses on Kickstarter, to help an individual in need, or to a political campaign are never deductible.”

He adds: “If you received any tickets, goods or services in exchange for the donation, you can only deduct the amount paid in excess of the value you received.”

Foreign investments. A good deal of people don’t have to worry about this, but if you’re wealthy, and you have that Swiss bank account, hopefully you have the money to hire someone competent to do your taxes.

“The penalties for getting these filings wrong can be steep,” Sullivan says. “For instance, if you have a foreign bank or financial account and fail to file a report of foreign bank and financial accounts, commonly referred to as an FBAR or FinCEN 114, the penalties can reach up to $10,000.”

If the IRS believes you willfully ignored the form, the penalties can “increase to the greater of $100,000 or 50 percent of the balance in the unreported account,” he explains.

State refunds. Did you receive money after filing your state taxes last year? And then when preparing your taxes, did you add that to the income you received last year?

“A lot of people forget to add their state refunds on their federal taxes,” says Anthony LoCascio, an enrolled agent who owns Anthony LoCascio consulting LLC, a Clinton, New Jersey-based financial planning firm.

And in case you’re wondering: If you received a federal tax refund last year, you don’t put that money down as income.

Real estate taxes. Tread carefully here. Your house can be home to plenty of tax errors, such as taking too much or little space when calculating your home-office tax deduction or claiming an incorrect amount for the mortgage interest tax deduction.

But new homeowners especially trip up with real estate taxes, according to Sullivan.

“If you bought a home during the tax year, you likely paid real estate taxes during the closing and should remember to deduct this amount on your return in addition to any other real estate taxes you paid,” he says.

Casino winnings. Do you play the lottery? Or maybe you sometimes go to the casino? “In South Florida, where I live, we have a lot of Seminole Casinos, and when you win, the casino gives you a statement to report your winnings,” says Meredith Tucker, a certified public accountant and executive at Kaufman Rossin, an accounting firm headquartered in Miami. “What folks sometimes don’t realize is that you’re allowed to deduct losses.”

So if you won $5,000, but it took $3,000 of betting money, be sure to note that. On the other hand, what if you just lose $5,000 and win nothing? Can you report that to the IRS?

“Uh, no,” Tucker says.

Rushing. As in, don’t do it. That, after all, is how most mistakes are made, no matter what you’re doing in life. Some of the more common mistakes, according to the IRS website, include misspellings of names, doing math incorrectly and even giving out incorrect banking information. It’s a great idea to get your refund via direct deposit, but not if you give out the wrong account number.

A lot of people mail in unsigned tax forms, which, according to the IRS, is like sending them an unsigned check.

If you don’t think you can finish your taxes on time, file Form 4868, Tucker says. “That’s the extension form,” she says. “I think there’s a misperception that if you file an extension on your taxes, that it’s a stigma or red flag with the IRS, and you’re more liable to be examined and audited.”

If you file an extension, Tucker says, you’ll have until October 15 to do your taxes right. “If you rush to prepare a return or make mistakes, you could leave money on the table,” she says, adding that if you know you’ll owe taxes and have the money to pay, mail the IRS what you think you need to send – and then use the extra months, weeks or days to calculate your taxes properly.

“Some people have that fear of God put in them, that if they don’t finish their taxes by April 15, the police are going to come, but that’s not how the tax system works,” Tucker says.

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Meredith Tucker, CPA, is an entrepreneurial services manager in Kaufman Rossin’s Ft. Lauderdale office. Kaufman Rossin is one of the Top 100 CPA firms in the U.S. Meredith can be reached at mtucker@kaufmanrossin.com.