As spring approaches we find ourselves smack dab in the middle of tax season gathering tax documents. Many people face this time with stress and trepidation due to the fear of the unknown. They have no idea whether they will have to pay in or get a refund.
Tax year 2014 is officially over, but there are still a few things you can do to positively affect your tax return. And one of the most important things you can do to improve your tax return is to capture all available deductions and credits. I have seen enough tax returns prepared by the “drive-through” type tax shops to see a pattern of missed deductions. Remember the IRS will not point out available deductions you miss, so you must be proactive.
Here are a few of commonly missed items:
- IRA/SEP Contributions – IRA contributions (if allowable based on income) can be made as late as the timely filing date of April 15th, and even better is the fact that SEP contributions for the self- employed can be made as late as Oct 15th if an extension is filed.
- Home Office Deductions- Some folks are fearful to take a home office deduction because they believe it’s a red flag. If you do have an office space that qualifies, you should take the deduction. It’s well worth it.
- Non-Cash Charity – Non-cash contributions to organizations like Goodwill or often omitted. If captured the true values are usually understated. Remember a receipt is a must and pictures and an itemized list can help determine the true value of the items donated.
- Self-Employed Business Expenses- Small business owners miss a ton of tax deductions. Meals and entertainment, business cell phone expenses, supplies, and web expenses (hosting, internet…etc.) are a few examples of costs that are commonly missed. If the expense is business related, grab that receipt and capture that deduction.
- Charity- We are a charitable nation and give to many causes, so don’t forget to capture all allowable charitable donations. Even if you gave $25 to the local food bank charity, dig up that receipt or canceled check (allowable as substantiation if less than $250). Enough small donations throughout the year will positively change your return and put a few more bucks back in your pocket.
- Estimated Tax Payments- While not a deduction, it’s important to make sure you include the correct amount of estimated tax payments applied in tax year 2014. Also, it’s unnecessary to pay an underpayment penalty for not sending in the appropriate amount throughout the tax year, so make sure to do so.
- Dependent Care Credits- If you have a child who is 12 years old or younger and pay for summer camps to allow you to work, you might be able to capture a dependent care credit.
- Car Purchase – If you bought a car in 2014 and live in a state with no state income tax (like TN) AND itemize your deductions, you can add your sales tax paid to your Schedule A. This can save you hundreds of dollars!
This is not an exhaustive list, but it’s a good start. These are common culprits for tax inefficiency, so, if you have not yet filed your tax return, you should review the list and have a proactive discussion with your tax preparer. It may save you some tax dollars!