The Biggest Mistakes People Make in Filing Taxes
First of a three-part series
By Allan S. Boress, CPA, CFE

      Don’t be upset, you’re not supposed to understand the Internal Revenue Code! The IRS’s rules and regulations were written by politicians for political and special interest reasons. The rules are not logical, easy or consistent, and it keeps us CPAs off welfare and employs tens of thousands of paid preparers across the US.

      However, after 30 years as a CPA, I can warn you how to avoid certain mistakes people make in filing their taxes. These errors cost taxpayers billions of dollars a year. So unless you don’t mind paying taxes…

Avoid Mistake #1: Using the wrong “filing status.”

      The tax forms are loaded with terms that civilians are really not supposed to understand. One of those is “filing status.” Our tax rates are a progressively increasing system, whereby those who make more money theoretically pay more taxes, and the differences in tax rates are based on someone’s filing status. There are five different filing statuses: single, married filing jointly, head of household, married filing separately, and surviving spouse.

      If one is single, your tax rate is higher than someone who is married. For example, if you are single with $50,000 a year taxable income, you would pay $9,165 to the government. If you are married filing jointly with the same income, you would only pay $6,770. If someone is single with a child, they could be a head of household which has a tax rate between single and married filing jointly. The government realizes that person has someone else to support and is willing to help out by making a tax allowance.

      Problems and tax overpayments arise when people decide to file as single when they could have filed as head-of-household thus paying more tax than needed. Likewise, the same occurs if they file married filing separate rather than married filing jointly. In many cases where a spouse has been abandoned, they can file as head-of-household saving lots of tax dollars and getting the earned income credit (if they have a dependent) not available to those married filing separately.

      In cases where one spouse owes the IRS, the government may take the entire refund, year after year, which would affect the innocent spouse. A fairly unknown device is “the innocent spouse rule” where the other spouse can get their share of a refund, despite the financial problems of their mate.

Allan Boress has been a CPA for 30 years and was twice-named One of the 100 Most Important People in the Accounting Profession by Accounting Today Magazine. Email him with any tax question at allanboress@comcast.net or call (352) 589-8333.