Don't let rush to file taxes by deadline lead to errors
— -- Gentlemen (and ladies), start your engines. Tax Day is less than a week away.
But as you race toward the finish line, be mindful of common tax-filing errors. Some mistakes could cost you money. Others could raise red flags at the IRS. Tax software will do math and point out tax breaks you might overlook, but these programs are only as good as the information you enter.
Here are some common last-minute blunders, and how to avoid them:
Automatically not itemizing.
A 2002 study by the Government Accountability Office found that more than 2 million taxpayers who claimed the standard deduction could have lowered their tax bills by itemizing.
Deductible expenses include interest on your mortgage, property taxes, charitable contributions and unreimbursed medical expenses that exceed 7.5% of your adjustable gross income.
Ordinarily, that threshold puts the medical-expense deduction out of reach for most taxpayers who have employer-provided health care.
But the economic downturn has led employers to shift more of the cost of health care to their workers in the form of higher deductibles, co-payments and co-insurance. That means more taxpayers could rack up enough unreimbursed expenses to claim the deduction, says Mary Canning, dean of the schools of taxation and accounting at Golden Gate University in San Francisco.
Automatically itemizing.
Some homeowners assume that they should always itemize because the interest on their mortgage is deductible, says David Bergstein, tax analyst for CCH CompleteTax, an online tax software program. But if you've paid off most of your home loan, your mortgage-interest deduction may be so small that you're better off taking the standard deduction.
For 2008, the standard deduction is $5,450 for single taxpayers and $10,900 for married couples who file jointly. If you're 65 or older or visually impaired, you're entitled to $6,800, or $13,000 for a married couple (assuming that both spouses qualify).
The general rule is that if your deductions exceed those amounts, you should itemize.
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