Inaccuracies May Cost 1 in 5 DIYers More Than $400 on Average
Feb 27, 2014 | 646 views | 0 0 comments | 8 8 recommendations | email to a friend | print

Inaccuracies May Cost 1 in 5 DIYers More Than $400 on Average

H&R Block study highlights last year’s most common miscues

Dallas, Texas – One billion dollars. That’s how much taxpayers who prepare their own tax returns could be leaving on the table. A recent H&R Block (NYSE: HRB) Second Look® review study revealed that when taxpayers prepare their own tax returns, about 1 in 5 of them left money on the table.

The study found that some of the most common inaccuracies affected a variety of taxpayers including small-business owners and students. The study found taxpayers leave money on the table due to the following, among other things:

·         Not itemizing when they should or not itemizing all they could

·         Not claiming higher education credits when they are appropriate or claiming the wrong tax break

·         Not claiming all appropriate expenses to offset income on Schedule C or failing to claim income properly on Schedule C.

“The tax return is the biggest financial event many people have every year and missing out on money that they qualify for is a problem,” said Aaron Martinez, Tax Professional at H&R Block. “People are leaving money on the table likely because they don’t know what tax credits and deductions they qualify to claim. The good news is that with some professional guidance, they can get their money back.”

Itemizing could be key to unlocking additional refund

Taking the standard deduction should not be a standard response, say H&R Block tax experts. Nearly one-third of all taxpayers claim itemized deductions. Perhaps millions more should. For those who do itemize, often they are missing all they could claim.

“Many taxpayers may automatically claim the standard deduction because it’s just the easy thing to do. Sometimes it really does pay to take the time to calculate all of your potential itemized deductions,” Martinez said.

The standard deduction is $6,100 for single filers and $12,200 for those married filing jointly. To see if a taxpayer can exceed the thresholds, all it takes is a calculator and receipts for expenses, including:

·         Mortgage interest and real estate taxes

·         Unreimbursed medical expenses

·         Unreimbursed job expenses

·         Uninsured casualty losses from fires, natural disasters or theft

·         Charitable contributions

·         Unreimbursed miscellaneous expenses.

For those in Texas, the ability to deduct state and local sales tax also is one of the most common overlooked deductions.

 

Tax breaks for higher education costs often missed by taxpayers

There are more than 18 million people in college, but only two-thirds are claiming one of the higher education tax breaks. These higher education tax breaks, such as the American Opportunity Credit and Lifetime Learning Credit, can help parents and students manage the costs of education and boost tax refunds, but they are frequently overlooked. Also, the tuition and fees deduction helps reduce taxable income by up to $4,000.

 

Schedule C inaccuracies cost taxpayers who file or should file business returns

With one-third of the national workforce identifying as freelancers, many people don’t realize they could file a Schedule C, which is how sole proprietors report business losses and profits. An advantage of operating a business is that expenses can directly offset income, which means an eligible freelancer can show a loss and deduct ordinary and necessary expenses.

Because Schedule C returns have one of the highest audit risks, small-business owners need to document all their income and expenses to ensure they file an accurate tax return. Some taxpayers may not even realize their side jobs rise to the level of the IRS considering it to be a business,” Pickering said. “For many, tax concerns related to their business can be confusing and they might find it useful to consult a tax professional.”

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