Quiz: Do you Know how to Avoid Common Mistakes on your Income Tax Return?
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About This Quiz
No 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.
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.
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.
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 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 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.
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.
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.
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.