New York (CNN/Money) -
For something that's required of most American citizens once a year, you'd think the feds would make tax returns a tad more user-friendly.
On average, a basic 1040 form takes some 10 hours to complete -- more if you're planning to itemize. And if you're looking for help in the IRS instruction guide, be prepared to wade through 126 pages of fine print. Is it any wonder that mistakes are common?
Last year, in fact, the IRS uncovered some 4.2 million math errors on federal returns. Millions more contained incomplete information or failed to claim all the deductions to which the taxpayer was entitled, all of which can delay the processing of your return and invite greater IRS scrutiny.
So before you drop your tax return in the mail this year, check out our list of the top 10 pitfalls to avoid. It could save you a headache or two in the end.
1. Wrong Social Security numbers: forgetting who you are
Sometimes it's the obvious that gets us. Consider Social Security numbers. According to the IRS, this little number causes more problems than anything else for tax filers. Last year, for example, 1.16 million returns had incorrect or missing numbers. So be diligent and check the Social Security number for yourself, your spouse and any other dependent you claim on your return. If you have a new baby, don't forget you need a SSN for him or her as well, in order to claim the child tax credit. If you need help tracking down a number, contact the Social Security Administration.
2. Unsigned returns: forgetting how to write your name
Plenty of folks forget to sign and date their return. But it's no small omission. The IRS considers those returns invalid and returns them to the taxpayer. (Of course, any payment you send in with an unsigned form is plenty valid and the Treasury Department will gladly accept it.)
If you're filing a return electronically, you don't have to worry about the signature. Instead, you'll get a Personal Identification Number in order to hit the "send" button, and it's that PIN that acts as your electronic signature.
3. Math errors: forgetting how to add and subtract
Of the 4.2 million mistakes made last year, some 330,000 tax filers computed the wrong amount for their refunds or balance due. And nearly as many miscalculated their taxable income. Meanwhile, some 172,000 filers miscalculated the amount of personal exemptions they were entitled to. Another 101,000 tallied their income incorrectly.
You can all but eliminate errors on your own return by crunching the numbers twice -- and always using a calculator.
4. Wrong tax table: forgetting how page numbers work
No one wants to pay too much or get short-changed on a refund. Yet thousands of us -- some 789,000, in fact -- computed the wrong amount for taxes owed last year. In some cases, it was due to math errors. But you can also blame those tiny tax tables in the back of the 1040 instruction booklet -- not easy on the eyes. If you're having trouble looking up the amount you owe, use a magnifying glass, switch to a tax software program or ask your eagle-eyed kid to help.
5. Earned income credit: forgetting you didn't make much
This tax break, meant to assist low-income workers who may or may not have kids, is a big perk that's often left on the table. In many cases, individuals who could qualify for the credit simply don't know about it. Or else they miscalculate what they're owed. To qualify, you must have worked in 2002 and you must file a tax return. Single filers with no kids would have to have an income less than $11,060 (or $12,060 for married couples filing jointly). But a married couple with more than one kid could earn up to $34,178 (or $33,178 for singles with two or more children). For on the EIC, log onto the IRS Web site and look for Publication 596.
6. Missing documents: forgetting how to stuff an envelope
Anytime you file a return, you'll want to be sure and have receipts and documents to back up your numbers. It doesn't hurt to include the required documentation with your return. Attach any W-2 forms from your employer and if you have investment income, you'll need your 1099. And don't forget things like a home mortgage statement if you're itemizing deductions.
7. Credit from past years: forgetting your life
Once those returns are filed, it's tempting to stash them away and forget about them. But a little reminiscing may be in order. According to Evan Snapper, senior manager personal financial counseling at Ernst & Young, taxpayers often forget about so-called "carryovers."
Those include items from years past that may end up saving (or costing) you money in taxes today. For example, if you had more than $3,000 worth of unmatched investment losses in years past, you can use them this year. If you've been charitably inclined, remember you can only claim charitable deductions that are worth 30 to 50 percent of your adjusted gross income, depending on what you've given and to whom. Unused amounts can be carried forward for five years, so see if you've got deductions waiting to be dusted off.
Finally, don't forget the Alternative Minimum Tax (AMT). If you paid it last year, this year you may get a credit, said Snapper.
8. Unclaimed child-care credit: forgetting you have kids
If you have a child under 17, you may be able to take a tax credit of $600 per kid. (Credits start to phase out if you're single and your AGI is $75,000 and $110,000 for married couples filing a joint return.)
Don't forget the child-care tax credit, either. It's currently worth up $720 per child, up to $1,440 for two or more kids. To claim it, you need to record the Social Security number of your child's caregiver (or the federal identification number) of your son or daughter's childcare center. You'll also need to check the small box next to the child's name. You'll find the boxes where you list your exemptions. That's section 6c, towards the top of the 1040.
9. Mortgage interest deductions: forgetting you own a house
If you're among the armies of homeowners who refinanced your mortgage, don't forget to keep good records. You can write off points you pay on a refinancing over the life of the loan. If you refinance a second time -- not uncommon last year as interest rates dropped -- you can write off any "remaining" points from your original refi.
Burlison recommends you hold onto the Form 1098 you get from your lender the year you refinance. Divide the points by the number of months in the life of the loan -- that's 360 months for a 30-year loan.
Then, start a file for your 2003 return and insert a reminder that you can keep writing off points next year.
10. Unnecessary payments: forgetting what "tax-free" means
If you've got a traditional, nondeductible IRA be sure you file a Form 8606. Many people don't. That's because they think that if their contributions -- which can be as much as $3,000 in 2002 or $3,500 for those over 50 -- aren't deductible, they don't have to do this extra paperwork.
(Note: Anyone can open a traditional IRA but depending on your income and if you're participating in a retirement plan at work, you might not be able to deduct the contributions.)
The 8606, which also records the amount of your IRA as of Dec. 31, 2002, lets the IRS know you aren't claiming any breaks this year -- so you're entitled to take the money out tax-free when you retire. You'll have to file the form every year you make a non-deductible contribution to the account, said Burlison, who adds that "not a lot of people know about" it. The 8606 is not necessary for Roth IRA contributions, which also are not deductible.
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