The Illinois CPA Society suggests taxpayers mind these common tax-filing mistakes to dodge issues with the IRS and Illinois Department of Revenue.
CHICAGO, April 8, 2024 – With the April 15 tax deadline just a week away, the rush to file your federal and state tax returns is on, but racing through preparation might inadvertently raise some red flags for the IRS or Illinois Department of Revenue (IDOR) to inspect. Here are four areas to watch when preparing and filing your tax returns.
1: Income
Generally, your earned income will be reported to both you and the government on the applicable forms, like W-2, 1099-B, 1099-DIV, 1099-INT, 1099-K, 1099-MISC, 1099-R, and SSA-1099, among others. If the income you report on your tax returns doesn’t match all these records, you could find yourself facing information requests and even fines. Take your time to ensure all your income forms are accounted for before preparing your tax returns—and confirm the proper totals are entered. Also, be aware that there’s no form for some taxable income, like proceeds from renting out your vacation property, meaning you’re responsible for reporting that income on your own.
2: Investments
In most situations, selling an investment is a taxable event in the year of the sale. To determine the tax consequence, you’ll need to know and report when and what you paid for the investment and when and what you sold it for. Financial institutions are required to provide this information on Form 1099-B, but there are several situations where you’re responsible for supplying that information: stocks (including real estate investment trusts) acquired before Jan. 1, 2011; mutual funds, exchange-traded funds, and dividend reinvestment plans acquired before Jan. 1, 2012; other specified securities, including most bonds, derivatives, and options acquired before Jan. 1, 2014; and cryptocurrency transactions. In other words, keep good records of all investment purchases and sales, and be sure to report not only the transactions that your financial institution reports on your various 1099 forms, but also the transactions you’re responsible for independently reporting.
3: Credits and Deductions
The IRS and IDOR scrutinize tax credits and deductions to discourage abuse and unsupported claims. Consider charitable or other itemized deductions, for instance, which could be a red flag if they’re especially large, unusual, or lack documentation. It’s important to keep meticulous records that support any credits and deductions you claim on your tax returns.
4: Incorrect Information
The simplest mistakes create headaches. A misspelled name, an incorrect Social Security or tax ID number, forgetting to update direct deposit information, or a missing signature can all cause problems or delays in processing your tax returns. In other words, review all the fields throughout your returns for accuracy—and keep in mind that even tax preparation software doesn’t always catch every mistake.
The final rush to file federal and state tax returns is always a hectic process. Be aware that requesting a filing extension will give you until Oct. 15, 2024, to file your returns. However, if taxes are likely to be owed, it’s still your obligation to pay those taxes by this year’s April 15, 2024, filing deadline.
If in doubt, the Illinois CPA Society reminds taxpayers that CPAs, certified public accountants, are ready to help. CPAs are strategically positioned to prepare and file your tax returns and help manage your taxes and personal finances all year long. The Illinois CPA Society’s free “Find a CPA” directory can help you find the trusted, strategic advisor that’s right for you based on location, types of services needed, and languages spoken. Find your CPA at www.icpas.org/findacpa.