Do Some Looking And Thinking Before Signing IRS Tax Form 1040

Peter J Reilly for Forbes writes:  We are approaching that magical time when the signing of tax returns becomes a last second fire drill, particularly for the half of a couple, that is least involved in getting the return prepared.  I’d like to suggest that you take a deep breath and actually look at your return before you take that final step. What follows is hardly a comprehensive checklist, but it covers some items that might have gotten by your preparer, even if they are pretty good.

Filing A Joint Return Is Not Mandatory

A joint return will usually result in a lower aggregate tax than two married filing separate returns.  There is a trade-off to that lower aggregate tax called joint and several liability.  That means the IRS can pursue either half of the couple for the whole tax. There is relief for “innocent spouses”, but it is challenging to qualify for that.  Joint and several liability is one of the reasons that I recommend that separate returns be seriously considered for the final year of a marriage.  Many tax preparers are not sensitive to the “joint and several liability” issue and will imply that joint filing is obligatory.

If you are presented with a joint return, in a hurry up ask no questions mode, slow down and take a deep breath.  If you have any reason to doubt, the accuracy of the return, don’t sign it until you have satisfied yourself about possible discrepancies.  If you have any reason to think your spouse has unreported income, don’t sign.  If the balance due is not going in with the return and it is mostly your spouse’s income creating it, don’t sign without a clear plan about how the balance will be dealt with.

Investment Interest Deduction

If you are one of those people who get a two hundred plus page book that purports to be your income tax return, I’m going to give you a couple of things that you should look for as you thumb through it.  The first one is Form 4952.  See if you have a number on Line 7 that is larger than the number on line 2.  If that is the case, you are accumulating investment interest deductions that you will be able to use in the future.  You will get to use that deduction if you ever have investment income other than long term capital gains and qualified dividends.  Given persistent low interest rates for investors, that future time may be “next never”. By giving up the preferential rate on some of your dividends and long term gains, you get to use the deduction in the current year.   This opportunity is not often well communicated. [snip]    The article continues @ Forbes, click here to continue reading "Do Some Looking And Thinking Before Signing Form 1040"