Most taxpayers are honest
The vast majority of American taxpayers are honest when it comes to filing and paying their taxes. The huge tax cheats are 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. Luckily, this will only cost the taxpayer time and 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 deductions account for a trillion dollars of deductions while standard deductions account for a cheeky half trillion. Only legitimate deductions are included in the figures from the IRS, so people that itemize 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 provides tables showing how much can be deducted for each state based on 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 example, if a boat, car, or airplane was purchased, that sales tax can be added to the amount shown 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 money they contributed to religious groups, homeless shelters, etc. 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. The taxpayer can also 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 mortgages and student loans. College students and graduates not claimed as a dependent can benefit from Mom and Dad’s help. The IRS treats the interest paid on a student loan by a parent as money given to the student first, 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.
