It’s my annual “Taxes from A to Z” series! If you’re wondering whether you can claim wardrobe expenses or whether to deduct a capital loss, you won’t want to miss it.
R is for Rounding Off
It’s important to be accurate when preparing your tax returns. But there’s accurate and then there’s accurate.
I’ve advised before that you shouldn’t guess or estimate your income and expenses: all of those perfect numbers can be an audit trigger.
That said, you can round numbers on a tax return, but round to the nearest dollar, not to the nearest hundred or thousand. The Internal Revenue Service (IRS) is a bit particular about how you should round, however. For example, they require that if you do round to whole dollars for your returns and schedules, you must round all amounts. For purposes of rounding, drop amounts under 50 cents ($97.25 becomes $97) and increase amounts from 50 to 99 cents to the next dollar ($97.76 becomes $98).
Again, that doesn’t mean that precision should fly out of the window: if you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total. That means $2.49 + $2.49 = $4.98 rounded to $5 and NOT $2.49 rounded to $2 + $2.49 rounded to $2 = $4.
For more Taxes A to Z, check out:
- A is for Affordable Care Act Reporting
- B is for Back Pay
- C is for Canceled Debt
- D is for Dependents
- E is for Eligible Rollover Distributions
- F is for Fat Finger Error
- G is for GI Bill
- H is for Harvesting Losses
- I is for Investment Income Expense
- J is for Junk Bonds
- K is for Strike Price
- L is for Late Filing & Late Payment Penalties
- M is for Marginal Tax Rate
- N is for NSF
- O is for Over-The-Counter Medications
- P is for Pease Limitations
- Q is for Quid Pro Quo