The Smart Tax Tips Smart People Need to Know
'Missing tax documents can lead to missing out on benefits taxpayers are entitled to claim' — and other keen insights
There is a season for everything under the sun. Yet many people would like to see the sun set on tax season — even well before April 15. It’s like having jury duty the same week as a root canal and a colonoscopy.
Seriously, who has time for all the paperwork? As for the current U.S. tax code, it might as well be Koine Greek. And it’s not just everyday people who feel overwhelmed.
“I find that taxes can be a bit bewildering,” admitted Catherine Martin, senior tax research analyst at H&R Block headquarters in Kansas City, Missouri. “No two tax returns are exactly the same, not even the one you filed last year compared to this year.”
Martin told LifeZette that taxes obviously change when the law changes, but also when one’s life changes.
“Getting married means a new filing status. Buying a home means new tax benefits, just to name a couple of examples,” she explained. “If you want to be sure that you get every tax benefit you’re entitled to and you want to do your own taxes, you can use H&R Block’s Tax Pro Review. You file with any H&R Block online product and have a tax pro review your return.”
This year, the federal government is still offering tax breaks for education, parenthood, homeownership, and saving for retirement, among other things.
“Education benefits are some of the most overlooked because a student may receive the tax form reporting tuition and fees, but the parents may be the ones filing the tax return,” Martin said. “Depending on the kind of academic program, what year the student is in, the income and other factors, a taxpayer may qualify for several different tax benefits, so it’s important to choose the one that maximizes tax savings.”
Whatever one does, Martin recommends organizing the necessary documents ahead of time to make tax prep progress much more smoothly.
“Checking the documents taxpayers have against a customized tax prep checklist can help them make sure they aren’t missing important paperwork,” the tax research analyst noted. “Missing tax documents can lead to missing out on tax benefits taxpayers are entitled to claim. Whether taxpayers are going to have a professional prepare their return or they plan to take the DIY route, having all their tax-related documents is critical for filing an accurate tax refund.”
What are things people commonly write off — or want to write off?
“Only one in three taxpayers itemize, but millions more are able to take advantage of itemizing — especially homeowners,” said Martin. “Owning a home is often the key that unlocks itemization, but some taxpayers with high state taxes and charitable contributions may also be able to itemize.”
Itemizing allows taxpayers to deduct a great deal, noted Martin, including qualifying charitable donations, medical expenses that exceed 7.5 percent of adjusted gross income, personal property taxes, real property taxes, state income or sales taxes, mortgage interest payments, certain mortgage insurance payments, and of course miscellaneous expenses, such as employee business expenses. Certain conditions apply in these cases, and consumers should check with tax professionals.
“Itemizing can save taxpayers hundreds of dollars,” Martin added. “For example, if a single taxpayer pays $9,600 in mortgage interest, property taxes and charitable donations, that is $3,250 more than the standard deduction of $6,350. With a marginal tax rate of 25 percent, itemizing saves this taxpayer up to $812.”
We’re talking about this at a time that Republicans continue to tout the tax reform bill that President Trump signed into law. Most of the new changes in tax law go into effect for 2018 — which will influence the income tax return people file in 2019.
“Next year, the tax filing experience will feel familiar,” Martin noted. “You’ll still gather all your tax and financial documents, calculate if you should itemize or take the standard deduction, and prepare your tax return.”
Martin compares the tax legislation to a life event.
“It’s not just a tax rate change or a bigger child tax benefit than you’ve had before,” the H&R Block representative explained. “It’s going to change the way you think about and plan your income taxes. You’ll need to take a fresh look at your individual situation to know the strategies to get your best tax outcome.”
As taxing as that might be, many people that help file your taxes for a living do field questions online and over the phone. H&R Block, like many other businesses, also offers information on its website.
Chris Woodward is a reporter for American Family News and OneNewsNow.com and is based in Mississippi.