Here are some last-minute tips as the April 18 tax filing deadline approaches

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When you’re struggling to complete your tax return, it’s easy to overlook the forms needed to complete and accurately file your tax return. Such careless mistakes can delay your refund, according to the IRS.

Most states require you to file your federal declaration and pay your bill by April 18 to avoid penalties for late filing and late payment. However, filing a renewal by the due date will bypass the late filing fee of 5% of your unpaid balance per month, which is capped at 25%.

Whether you’re filing your tax return now or after an extension, you need to have all of your documentation on hand to avoid IRS scrutiny.

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Additionally, you may miss out on tax savings opportunities if you submit incomplete information, said certified financial planner Edward Jastrem, director of financial planning at Heritage Financial Services in Westwood, Massachusetts.

Before filing your tax return, you will need forms for each source of income. Some of the more common ones you may be familiar with include a W-2 from your job, a 1099-NEC for contract labor, and a 1099-G for unemployment benefits. You can verify these by getting a free IRS transcript.

For write-offs, common forms may include 1098 for mortgage interest, 5498 for individual retirement account deposits, and 5498-SA for health savings account contributions, among others.

Even if you have all the common forms, you can accidentally skip some of the lesser-known ones, resulting in an incomplete declaration, tax experts say.

capital gains

For example, applicants often miss capital gains tax forms, said Ryan Marshall, CFP and partner at ELA Financial Group in Wyckoff, New Jersey.

The most common omissions are 1099-B for capital gains and losses and 1099-DIV for dividends and distributions, he said.

“There’s a common misconception that if a client hasn’t physically received payment from their investment, it’s not taxable,” Marshall said, suggesting that filers always document their accounts and verify past returns.

Non-deductible IRA contributions

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Another common mistake is skipping Form 8606 for nondeductible IRA contributions, said Marianela Collado, CFP and CPA at Tobias Financial Advisors in Plantation, Fla.

This is a problem because you may need these documents to verify contributions for what is known as a Roth conversion, a move that bypasses Roth IRA deposit income limits and allows for future tax-free growth. Without proof of original deposits, you may be taxed twice on the same income.

Foreign Bank Accounts

And you need to be careful with the foreign bank and financial account report, known as FBAR, on FinCEN Form 114, Collado said. The FBAR applies to non-US bank accounts with a balance of $10,000 or more on any day of the calendar year.

“This has criminal penalties if you fail to submit or, worse, fail to report earnings associated with that overseas bank account,” she warned.

Qualified Charitable Distributions

Investors age 70½ and older can use qualifying charitable distributions, or QCDs, to donate up to $100,000 per year from an IRA, which allows the retiree to reduce adjusted gross income.

But the move often triggers an error because brokers don’t separate the QCD filing on Form 1099-R, which details pension plan distributions, Heritage Financial Services’ Jastrem explained.

For example, if you withdrew $50,000 from an IRA in 2021 and $20,000 was earmarked for the QCD, your 1099-R will show $50,000 for distributions even though only $30,000 is taxable income.

“Unless the individual or tax preparer makes a manual adjustment and records the QCD, the entire IRA distribution could be reported as taxable,” he said. Here are some last-minute tips as the April 18 tax filing deadline approaches

Gary B. Graves

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