Valley Voice January 2017 | Page 67

6. Misusing -- or not using -- the earned-income credit

This is a provision, created by Congress to help the poorest in our nation, but lawmakers designed it to be one of the most convoluted provisions in our tax code. Unfortunately, the group of taxpayers it was meant to help is also the ones who lack the tax sophistication or the dollars necessary to hire a professional to claim those dollars.

7. Losing receipts

No receipt, No deduction. So hunt down all those receipts and start a consistent and immediate archival process. The IRS won’t care that they faded with the heat or that they were stolen in a robbery. It’s the most simple rule of all the IRS has…. No Receipt, No Deduction, period. Consider taking a picture on your smart phone so that you have it immediately.

8. Failing to report domestic workers

Even if you don't think you are wealthy enough to have domestic workers, you just may be. You have to pay the payroll taxes on your nanny, housecleaner or in-home caregiver. If you paid $1,800 or more in 2013 to any one household employee, you are required to withhold, and match, both Social Security (6.2%) and Medicare (1.45%) taxes. You must file Schedule H to compute and report the liability. Keep in mind $1,800 is only $150 a month or a mere $37.50 a week.

9. Failing to report all income

You can't avoid reporting all of your income just because you don't get a W-2 form or a 1099. Not all income is reported on 1099s. That doesn't excuse you from having to pay tax on it. The fact that there's no reporting to the IRS doesn't prevent the agency from auditing your bank statements for deposits, and your receipts. Unreported income can lead to civil and criminal sanctions. I don't care how lucky you feel. The potential consequences aren't worth the risk.

10. Failing to check for the alternative minimum tax

The AMT, or "awfully mean tax," was created to catch high-income taxpayers who used allowable deductions and credits to wipe out too much tax liability. It's an alternative computation of your tax, with different deductions, add-backs and flat rates. You pay the higher of your regular tax or that computed under the AMT.