Don’t Overlook Tax Deductions

Posted by admin on Tuesday, April 17, 2012

Average Time Required for Filing Your Taxes
• Form 1040 • Form 1040A • Form 1040EZ
Estimated time needed for completing and submitting Tax Form 1040 without Professional Tax Preparer 22 hours, including

• Record Keeping
• Tax Planning
• Form Completion
• Form Submission

$290 average out-of-pocket costs for tax preparation and submission of Tax Form 1040 without a Professional Tax Preparer

You May Want To Hire A Tax Professional If You:

• Own a business
• Have rental properties
• Have complicated stock transactions
• Filed for divorce
• Sold property
• Have employee stock options
• Have cancellation of debt issues
• Filed for bankruptcy
• Received a major gift or prize
• Are generally confused

Average Tax Professional Fees For 2011 Tax Season:

• $233 For an itemized Form 1040 and State Return
• $128 For Form 1040 without itemized deductions and State Return

COMMONLY MISSED DEDUCTIONS

Another important reason to hire a tax professional is to catch errors
and keep from missing deductions before you file. The following are
six commonly missed deductions.

CHARITABLE NONCASH CONTRIBUTIONS

• includes old clothes and other items donated to charities
• $0.14 per mile to and from a charity where you volunteer
• Will need to itemize on tax return

UNEMPLOYMENT DEDUCTIONS

• Eligible if you looked for a job in present occupation
• Includes resume preparation and employment agency fees
• Most itemize; needs to exceed 2% of adjusted gross income

HEALTH INSURANCE PREMIUMS

• includes long-term premiums based on your age
• Medical expenses must exceed 7.5% of adjusted gross income
• Can deduct 100% if self-employed to extent of net income

HIGHER EDUCATION EXPENSES

• includes tuition and fees, room and board, books, and supplies
• Maximum deduction benefit of up to $4,000
• School should send Form 1098-T for tuition breakdown

INVESTMENT AND TAX EXPENSES

• Categorized under Miscellaneous Itemized Expenses
• Total must exceed 2% of adjusted gross income

EDUCATOR EXPENSES

• Eligible educators can deduct up to $250
• Includes materials such as books, supplies, and computer equipment
• Expenses must qualify as “ordinary” and “necessary” by IRS

SMART DECISIONS WITH YOUR REFUND

Average refund amount for 2011 filing season $2,913

Most refund checks will go right into savings or paying off debt, but to get your refund to work for you, consider making decisions that will affect next year’s tax return.
How Taxpayers Spend Their Refund

• Savings 43.8%
• Pay Down Debt 39.4%
• Other 5.2%
• Vacation 11.3%
• Major Purchase 12.3%
• Everyday Expenses 28.7%

Super-Charge Your Refund For Next Year

Creating Tax Deductions

Potential Tax Deduction
Charity and Volunteerism

• Donating money and/or used clothes
• volunteering at a non-profit organization

Retirement Fund

• Adding money roan IRA. SEP. SIMPLE, or solo 401(k) retirement plan. Deduction Benefit Based on individual contributions

Creating Tax Credits

Renewable Energy/ Investment Tax CreditCredit Benefit Potential Tax Credit

• Geothermal heat pump
• Small wind turbines
• Solar Energy Systems
• Fuel Cells

Lifetime Learning Tax Credit Up to $2,000 30% of total development

• Take one or more courses at an eligible educational institution.
• Income must be less than $60,000 or less than 120,000 if married, filing jointly

Learning to be tax smart can save you a little or a lot. Always consult a tax professional for the best advice on how to handle your individual financial situation.

Categories: taxes Tagged:deductionsinfographictaxes