Overlooking Simple Deductions could cost Taxpayers
26th January 2010 by Tax Man No CommentsMost taxpayers are honest
The vast majority of American taxpayers are honest when it comes to filing and paying their taxes. The million dollar tax cheats are very rare. Instead of taking advantage, the opposite is in fact the case - most US taxpayers don’t take advantage of deductions and overpay. The IRS reports that taxpayers tend to make the same mistakes each year. The number one mistake on returns every year is forgetting to include a social security number on the return. This will only cost a taxpayer time, not money.
Convenience can be costly
Approximately 85 million taxpayers choose to take standard deductions as opposed to itemizing their tax returns. Only 46 million people actually itemize. The smaller group of taxpayers claims twice the deductions of the larger group. Itemized returns account for one trillion dollars worth of deductions while standard deductions only account for a half trillion dollars in deductions. Only legitimate deductions are included in the figures from the IRS, so itemizers aren’t cheating. Sadly, most people admit they file the standard form out of convenience and a lack of documentation. The convenience and lack of proper keeping of records could be costing taxpayers to pay up to four times how much they should be.
State sales tax most overlooked
Everyone is entitled to claim state sales tax they paid during the course of a tax year. The IRS has tables that show how much can be deducted, depending on the state you live in and your income. The biggest advantage is for those people living in states that do not have a state income tax, but everyone can benefit from this deduction. Also, there are items that can give a taxpayer a bigger deduction that what tables will show you. For instance, the sales tax from the purchase of a car, boat or airplane can be added into the amount in the table. State sales tax on home building supplies are also deductible.
Giving could get you a deduction
Most tax payers already take the appropriate deductions for contributing to charitable organizations in the form of money. Taxpayers deduct contributions to religious organizations, homeless shelters, and so forth. However, most taxpayers overlook the out-of-pocket deductions available for doing good works. For example, if you bake a cake for a church fundraiser, the cost of the ingredients is tax deductible. In addition, the taxpayer can claim 14 cents per mile for delivering the item.
Children benefit from Mom and Dad’s help
Interest paid is a common deduction. Most people know to deduct interest paid on student loans and mortgages. College students and graduates not claimed as a dependent can benefit from Mom and Dad’s help. The IRS treats interest paid on a student loan by a parent as money given to the student who then paid the debt. As long as the child is not claimed as a dependent by the parent, the child can claim the interest as a deduction on his/her tax return.
