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About This QuizNo one wants to make a mistake on his or her income tax return. This is especially true if you are owed a refund or end up paying more taxes than you should. A simple mistake can cost you a significant amount of money or delay your refund by weeks. Take this quiz to ensure you know how to minimize errors on your tax returns.
How many pages of information are currently contained in the official U.S. Tax Code?
According to news service Reuters, there are currently 70,000 pages in the official U.S. Tax Code -- that's more pages than 33 Oxford American dictionaries.
If there are mistakes on your tax return or in how you file it, what are some of the more common outcomes you might experience?
audits and investigations
criminal charges, trials and fines
delayed refunds, penalties and interest
Most mistakes on income tax returns cause delays in refund processing, late penalties for taxes not being filed on time and interest charged on any taxes owed.
What is one of the most important things that you can do with your tax return to avoid problems and save money?
file on time
The most important thing you should do is to file your return by the April 15 deadline. Late filing will cost you money, regardless of your return having no errors.
include all forms with the return
double-check the return before filing
According to the Internal Revenue Service (IRS), how many Americans wait until the week before the deadline to file their return?
around 30 percent
around 20 percent
The IRS reports that more than 20 percent of Americans wait until the last week to file their tax returns. These people tend to be the ones with complicated returns, which opens them up to making mistakes mainly due to stress caused by the looming deadline.
around 15 percent
What is the rate and terms of interest charged by the Internal Revenue Service on unpaid taxes beginning from the due date?
federal short-term rate plus 3 percent compounded daily
The IRS charges the federal short-term interest rate plus 3 percent compounded daily on any unpaid taxes from the date due until payment is received. That is a hefty interest rate to pay, so you should do your best to pay your taxes by the due date.
prime rate plus 5 percent compounded weekly
15 percent compounded quarterly
What is the late filing penalty rate assessed by the IRS on the taxes you owe?
4 percent per month or part of month to a 30 percent maximum
5 percent per month or part of month to a 25 percent maximum
The IRS charges a late filing penalty of 5 percent per month or part of month to a 25 percent maximum on the taxes that you owe. If you owe $1,000 taxes and take five months or more to pay, the penalty will add $250 to your tax bill.
6 percent per month or part of month to a 20 percent maximum
What's the most common mistake that people who wait until the last minute to file make?
not signing the return
According to the IRS, many people who file near the deadline often forget to sign their return. Making such a simple mistake can be expensive.
not putting postage on the mailing envelope
not including payment or refund information on the return
What can be most the most expensive thing about making a simple mistake on your tax return?
delay in refund
being charged penalties and interest
Double check your tax return before you put it in the mail; a simple error will cause processing delays and can result in penalties and interest charges. Not only could the error delay refunds, but it can also reduce the amount of your refund; since some states assess a penalty for late filing even if you are due a refund.
What is the best way to avoid many possible mistakes when filing a tax return?
Have someone double-check the return for you.
Hire a tax professional to do your return.
E-file your return.
The best way to avoid most errors is to e-file your return. Tax software performs all the calculations on your behalf and ensures that all information entered is legible.
What does it cost the IRS to process an e-file tax return?
The cost of processing an e-file return is 35 cents and results in getting your refund much faster. The average tax return that is mailed costs the IRS $2.87 to process, so e-filing also frees up more money to finance government programs.
What is a common mistake that filers make that often ends up costing them money?
wrong amounts entered
When you enter an incorrect number on a tax form, you could end up owing money that you didn't anticipate. This could result in interest charges on top of the extra taxes. Beware -- tax software won't know if you entered an incorrect amount.
missed tax credits
What should you do if you receive a letter from the IRS pointing out that you made math errors?
Check the math on your copy of the return.
The IRS can also make mistakes, so you should dig out the copy of your return and double check the math. Your best bet is to double check your math before you send in your return to avoid an problems related to your calculations.
Write them an angry letter.
Be thankful they told you about the mistake rather than letting fees rack up with your knowledge.
Before you even start filling out your return, what is a good way to insure that you pay the least tax possible?
Purchase current tax software.
Read the most up-to-date information on tax changes.
Reading and researching the most up-to-date tax information can help you reduce your taxes as much as allowable. If you don't know the most current deductions and credits, you could miss out on keeping a lot of your money.
Consult a tax attorney.
What is an easy way for some people to have their tax return completed by a professional?
Give it to your CPA brother-in-law.
Take it to a mall kiosk.
Take part in a Super Saturday if you qualify.
The IRS teams up with organizations in communities to host an event called Super Saturday. If you qualify to participate, you can have your return prepared professionally for free.
How long should you maintain copies of your tax returns before you destroy them?
There are several statutes of limitation that the IRS has to follow regarding prosecution for various filing problems. Nevertheless, it's best to keep returns for at least six years.
What kind of activity can get you in to hot water and possible prosecution when dealing with tax returns?
failing to report income
abusing charitable donations
both of the above
Failing to report income, falsifying information, abusing charitable donations, paying for personal expenses with business funds and many more activities could earn you an audit and lead to charges of tax evasion or fraud. Honesty is always the best policy.
What recent scam does the IRS find particularly alarming?
forging of documents
The IRS is seeing an alarming increase in phishing via email by scam artists pretending to be employees of the IRS. The IRS will never request detailed personal or financial information through email.
How much do Americans overpay in taxes each year because of missed deductions or credits?
A report produced by the Government Accountability Office in March 2002 said that Americans overpaid their taxes by almost a billion dollars. According to the report, most missed money comes from people using the standard deduction instead of itemizing their deductions.
What does the IRS advise when choosing which form to use for your income tax return?
Always use the form that gives the most complete documentation.
Always use the 1040 form.
Use the simplest form that covers your situation.
The IRS encourages everyone to use the simplest form that covers their situation adequately. Also, the simpler the form, the faster you will receive your refund.
Can you have more than one status on your income tax return?
Make sure that you only check one status on your tax return. If your status changed throughout the year, you must check whatever your status was as of Dec. 31 of the tax year for which you are filing.
yes, if you are filing jointly with your spouse