If your eyes are straining from rolling too much, we suggest you simply bookmark this page for the final seconds prior to your sending off for your return. Why?

The IRS charges 6% interest and up to a 20% penalty for incorrect filings. A double-check can save you tons of time, and possibly, tons of money.

• Did you include your W-2?

Obviously this won’t be a problem for e-filings, but for our snailmail brothers and sisters, it’s one of the most-repeated mistakes.



• Did you write the correct social security number?

Go over your return and see if you didn’t forget a digit, or mix your wife’s with your own. It’s a silly mistake that can cost you time or money (or both), and the IRS says it’s the number-one “whoops” mistake.

• Did you file under the correct status?

Easy to slip up on this one if you’re recently married or separated. Same level of “whoops” in the IRS mistake list.

• Did you claim new home credits too early?

You must have closed escrow by January 1, 2010. Anything after that has to wait for next year. Sorry.

• Did you report all your income?

No problem for anyone who’s worked at the same job for umpteen years, but if you’ve been floating about doing work for multiple employers (or, gulp, a now-defunct business), it can be tough to keep track of all the W-2s you’re owed.

• Did you report all your charitable giving?

If you’re just starting now, it’s a little late, but make sure you keep receipts for anything and everything you give away to charitable organizations. Anything valued over $200 has to have a corresponding receipt. If the IRS comes-a-auditing, be prepared to whip out your receipt logs, or you’ll have an uncomfortable amount of ‘splainin’ to do.

• Did you report all your mileage?

Same as your charitable giving, above. Make sure you keep an immaculate log. Again, the IRS expects you to keep your records for at least five years, and they’ll expect you to have those records ready for display whenever they’d like a closer look.

• Are you sure your “dependent” is actually a dependent?

Visit the IRS’s website and make darn sure your hanger-on qualifies as a dependent.

If this list saves just one person a week’s worth of waiting for a much-needed return, then our post will have been worth the effort!

Here’s a quick list of the more common ones: where you get them, what you do with them, and what to watch out for.

CP 21B Form

The CP21B is a form for handling the overpayment of taxes. If you already filed a tax return, and you amend it to include new deductions (like the first time home buyer’s credit), you’ll probably end up getting one of these. The good news is that, in theory at least, the IRS will give you your money in 30 days. They say you don’t need to do anything at this point.

But be careful. The CP 21B might get to you after your taxes get amended in a way that makes the money unavailable again. For example, you might be due a refund because you purchased a new home—but then find out that the IRS has decided you weren’t a first-time homebuyer after all. If you’re at all unsure, call the IRS before you start planning to spend the money (they give you a number on the form). It’s a small inconvenience that could save you big trouble later on.

HUD-1 Form

If you’ve purchased a home before, the HUD1 form might be familiar. This form summarizes all the costs and charges of buying a new home. You can view a copy of the HUD-1 form to see exactly how it works, but it’s basically a long list of small charges.

Since the value of the home determines the amount of the new home tax credit, a HUD-1 form is the simplest way to document how much of a credit you should get. So when you apply for the credit, you’ll need to have this form filled out and sent in.

Recorded Deed

A deed simply records who owns a particular home or piece of property. While it shouldn’t be strictly necessary (since the HUD-1 form also shows who bought and sold the property), the deed is redundant. More information is better, though, so sending in a copy of your deed is a good way to ensure that what you get back from the IRS is a refund, not a request for more information.

1040, 1040A, 1040EZ, or 1040X forms

You’ve probably filed a 1040 of one kind or another already. If you’re collecting the first-time buyer’s tax credit, you may need to amend it. This is one of those processes that’s best done automatically with tax preparation websites or software—there’s a lot of simple math and double-checking that you may end up needing to do, and don’t want to get wrong.

Form 5405: The First-Time Home Buyer Credit form

This is the form you can use to apply for the First Time Home Buyer’s Credit. It’s fairly straightforward—most of the information on this form will come from the other documents you’re using—but it’s absolutely critical to double- and triple-check the 5405 form to make sure it’s entirely accurate.

The good news for you is that everyone’s on your side: your realtor wants you to get the payment, because it lets you spend more money on a house; the government wants you to get the money because it’s being spent in order to raise home prices; and the company or individual who helps you with your taxes has every reason in the world to want you to get this extra cash.

1. Most cars, motorcycles, light trucks, motor homes, SUV’s and RV’s are eligible for this tax deduction, though there are some restrictions. The Gross Vehicle Weight (GVW) of the vehicle has to be less than 8500 pounds. Thus, for example, the Hummer H1 and H2 are ineligible, since their GVW’s exceed 8500 lbs, but the H3 satisfies the requirement. You can look up the GVW of your vehicle before claiming the deduction.
2. State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible. Leased vehicles are ineligible. In states that do not have sales taxes, there is a provision for deduction of other taxes or fees paid.
3. The vehicle tax credit has a deadline. The vehicles must be purchased on or after February 17, 2009, and on or before December 31, 2009.
4. Your eligibility for the vehicle tax credit depends on your income. Taxpayers with modified AGI of less than $125,000 (if filing singly) or $250,000 (if filing jointly) are eligible to get the full benefit. If your AGI exceeds these amounts, then the amount of deductions is phased out till $135,000 for single filers and till $260,000 for joint filers. Therefore families whose AGI exceeds these amounts should make a careful decision as to who will potentially be using the vehicle and who should be buying it, so that it may be possible to get the full benefit. Taxpayers with AGI above $135,000 (if filing singly) or $260,000 (if filing jointly) do not qualify.
5. Businesses are ineligible to claim this deduction. They can, however, capitalize the sales tax as part of the acquisition of the vehicle, and can claim Section 179 (depreciation expense).
6. Itemizing doesn’t matter. This deduction can be availed of, whether or not you itemize other deductions on your Schedule A.

The Obama administration is trying to jump start the sagging automobile sector by offering these various incentives. Earlier this year owners of used fuel-inefficient vehicles were given an incentive to trade in their vehicles for more fuel efficient ones, in the “Cash for Clunkers” program. This incentive was in the form of a voucher and did not have any AGI restrictions, and the voucher amount is non-taxable. Anyone contemplating buying a new car should look into the current offering and make a wise decision. The offer, one more time, is only for cars and other qualifying vehicles purchased on or before December 31, 2009. The IRS has more information.

There has never been a better time to purchase that new car you have been fantasizing about, and save some federal tax dollars in the process.

Via Phillip on Flickr.

Getting information from Swiss banks: even when they aren’t in Switzerland, these banks are feeling the heat. It may be the single best way to make up for a weak 2008 tax return: collect unpaid taxes on money earned during the good years, instead!

Legalizing in order to tax: The Washington Post recently published an editorial calling for legalizing and taxing drugs. For a paper that values its connections to the political mainstream, that’s a significant step. Among other things, they argue that it’s a dollars-and-cents issue:

Having fought the war on drugs, we know that ending the drug war is the right thing to do — for all of us, especially taxpayers. While the financial benefits of drug legalization are not our main concern, they are substantial. In a July referendum, Oakland, Calif., voted to tax drug sales by a 4-to-1 margin. Harvard economist Jeffrey Miron estimates that ending the drug war would save $44 billion annually, with taxes bringing in an additional $33 billion.

Finding new things to illegalize and fine: High-Frequency Trading is a fiendishly complex subject which is only partly understood, even by PhDs and industry experts. Fortunately, the qualifications for having an opinion on it are a bit lower. One new proposal is a tax on every trade as a way to partly ban high-frequency trading.

So that’s the plan: tax money overseas, legalize drugs, and create a fine for something nobody really understands.

How much of this will really happen? The answer is, likely, almost none of it: overseas banks have always had to assume that there could be a crackdown, so they’ve taken precautions to make it hard to get money out. While drug legalization is getting more popular, it’s hard to beat the status quo. And a trading tax is not likely to get passed any time soon—if Wall Streeters are already paying income taxes, why kill the golden goose by cutting their incomes in order to tax them a different way?

1. Small business gets a break. Even though the IRS has tried to be kinder and gentler, they’ve still cracked down on companies that don’t pay their payroll taxes. They’re going to back down.

2. They’re going to work on getting people their tax credits faster. No more waiting for the housing tax credit!

3. Bad news? They’re also worried about tax credit fraud.

4. The IRS is going after people who don’t file — to make sure they get tax credits even if they don’t have to file their taxes!

5. The IRS wants to get W-2’s and 1099’s earlier in the year. Right now, it can take months after filing to find out about an error. They’d like to make sure it happens faster.

6. They’re going to try especially hard not to give poorer tax payers a refund, and then take it back.

7. The taxpayer advocate is keeping busy! With more and more people needing help with their finances, the advocates are helping to negotiate with the IRS and advise taxpayers on their options.

8. Partial payment installment plans could make a big comeback. For taxpayers who can’t afford their entire debt, this option has long been just out of reach. But it’s a great way to settle back taxes and help taxpayers (and the IRS) move on.

9. They’re planning on simplifying the tax law. But if it takes 131 pages to tell Congress what taxpayers want, and “make things less complicated!” gets one paragraph of that, the odds can’t be too high.

There’s lots of room for improvement, but it’s always good to see someone speaking up for the average taxpayer. Hopefully this will

You can read the whole taxpayer advocate’s report to Congress online. Peter Pappas has a more cynical take.