Have you put off filing your taxes this year? If tax season makes you cringe, or you’re planning on doing them on your own but looking for a few last minute tips on how to avoid errors, you’re in luck. Ernst & Young’s, Greg Rosica joined me for an interview this week to discuss the most common tax filing errors and how they can be avoided; and new guidelines that went into effect on January 1, 2013.
Candace Rose: What are the most common tax filing errors and how can they be avoided?
Greg Rosica: “There are lots of errors that happen as people try to prepare their tax return. One of the things we’ve done with the Ernst & Young tax guide is list out 25 of the most common errors. And some of those errors are simple, like not signing your tax return- you’re so excited about it, you got it done, you stick it in the mail and sending it off; or not checking your math.
If you use a computer program, and not going back and making sure you input your numbers correctly. But then a great thing to do to try and avoid some of these are to sit back, and take out last year’s tax return. So if you’re doing 2012’s tax return, look at 2011’s and look for items. Maybe you had a stock loss that you weren’t able to use last year, and now all of a sudden it carries over to this year and you can take advantage of that deduction. Also, it’ll trigger your mind of things like deductions or income items that are going to be helpful to you to make sure you don’t overlook those in the current year as well.
Another error we see a lot is in the area of selling a mutual fund. And so if you sell a mutual fund that you’ve had for a couple of years, most people pay too much tax on it. They either report too much of a gain, or too little of a loss. In particular if they’ve held that mutual fund for a few years. It’s important to look back and see where you can make that situation a little bit better.”
Candace Rose: Is there anything new that tax payers need to know this year?
Greg Rosica: “There are. This is actually the 100th year of having an income tax. It started back in 1913, and it was fairly simple back then and the rates were much lower. It’s gotten complicated over the years, things have certainly changed each year and this year’s no different. For 2013, starting back on January 1st, we had a change of tax laws. Many of those impact us this year, and I think for a lot of people and for the typical person making $50,000 a year, they’re seeing less of a paycheck. Their payroll taxes went up 2%, and they’re having a little bit less take home pay along the way. We’re seeing the impact of that, as well as some retroactive changes back to 2012, so as you file your 2012 tax return, it’s important to see what might be applicable for your situation.
Things like the ability to deduct sales and use tax, came back into play. The ability for a school teacher to take a deduction above the line for school supplies that they incur and buy themselves. So there’s several things that came back as a result of the changes. It’s really important that people understand how the changes impact them personally. Out of all the changes that occur, you have to look through those and try to understand what you do.
One of the things we do in the Ernst & Young tax guide is segregate it out by different family situations. If you’re a family, an investor, if you’re self-employed, if you own a business- we have different sections to help trigger your mind of what kinds of things will be applicable in your tax situation and things you can take advantage of, and planning tips as well.”
Candace Rose: Do you have any additional tips or information you’d like to share with us?
Greg Rosica: “Sure, I think when people go through and look for deductions, we also have a list in the Ernst & Young tax guide of 50 of the most overlooked deductions. Those are items that think about what kind of life changes you may have had over the past year. Life changes always mean tax changes. And they aren’t just financial situation changes, but also personal ones. For example if you change jobs you can get a deduction for job hunting expenses (if you’re in the same field of work); if you bought and sold a house, there’s deductions for real estate taxes that you can take that you’ll find on your closing statement doing that. And then other life changes like having a baby, getting married, getting divorced…all those things have tax implications and can be deductions that you can take advantage of as well.
All of those are in the Ernst & Young Tax Guide. It’s available in bookstores and in traditional online stores as well. We’re also excited that we have an e-book this year, and so you can download that onto your e-book reader. You can also go to our website which is EY.com/EYTaxGuide, and there you’ll find a list of the 25 common errors and the 50 most overlooked deductions. ”