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COMMONLY OVERLOOKED TAX DEDUCTIONS

7 Commonly Overlooked Tax Deductions

During tax season, everyone wants to pay the least amount of taxes, and if possible get a tax refund in return. Unfortunately, many people end up paying more than they have to, simply because they weren’t aware of all the tax deductions that they are entitled to. Here are seven deductions that are commonly overlooked:

Education Credits– The Lifetime Learning credit can give taxpayers up to $2,000 in tax credits. Individuals may be eligible if they have taken classes or courses for continuing education purposes, and their employer’s do not reimburse them for the costs. A more well-known education credit is the American Opportunity credit. This credit allows a taxpayer to deduct up to $2,500 of expenses for undergraduate students.

Educator Expenses– Any eligible teacher that teaches grades K-12 is allowed to deduct up to $250 on any supplies that they personally purchased for use in the classroom. If more than $250 is spent, the remainder can be deducted on Schedule A.

Hobby Expenses– Any operation that makes some money but is not quite a small business, or doesn’t make a profit for more than three years may be considered a hobby. Certain hobby expenses can be deducted, but they can only be deducted up to the amount of income that was actually generated. Unfortunately, any expenses over the amount that you earned cannot be deducted.

Last Year’s State Income Taxes– Any state income taxes that you paid for last year are eligible to be deducted on Schedule A. If you choose not to deduct your state income taxes, you can be eligible to deduct any amount of state or local taxes that you paid instead.

Job Hunting Costs– It is important to keep track of any expenses that you incur while looking for a job because these expenses may be deducted up to the 2% of AGI limit. Unfortunately, these do not apply for your first job, only jobs within the same line of work that you have previously held. Some key expenses to keep track of that may be eligible for deduction are transportation expenses, cab fare, food and lodging expenses, employment agency fees, and the cost printing business cards and resumes.

Financial Planning and Management Expenses– Any expenses that are incurred that have to do with managing your money or planning for the future can be deducted. This can include meeting with a financial advisor to budget money, meeting with an attorney to plan a will, or anything else that can be categorized as planning for the future.

Tax Preparation Fees– Any fees that are spent preparing your tax return can be deducted on Schedule A. In addition, if you used a debit or credit card to pay your taxes, you can also deduct a convenience fee.

These tax deductions can help you save money when filing your taxes this tax season, so if you think you are eligible for any of these you may want to check with a tax professional. In addition, it is also a wise decision to inquire with a tax specialist because they can help enlighten you about any other deductions that you may be available for in addition to these commonly overlooked ones.

How to Waive Your Penalties with the IRS Using the First-Time Penalty Abatment

Reduce Your IRS Penalties – First-Time Penalty Abatement Waiver

Has the IRS charged you with a penalty relating to filing or paying your taxes? Have you always been compliant with the IRS in past years? If the answer is yes to both of these questions, than there may be a way for you to get your IRS penalty reduced or abated.

The First-Time Penalty Abatement Waiver (FTA) was created 13 years ago by the IRS to help administer the consistent and fair abatement of penalties, reward past compliance, and promote future compliance. The FTA can be used by first-time non-compliant taxpayers for any single tax period in which certain penalties have been assessed.

Although the First-Time Abatement was first introduced in 2001, many individuals and businesses are not aware of its existence and do not make use of it. In 2010, over 90% of individuals that would have qualified for the abatement did not receive the waiver because they did not file for it. THE IRS WILL NOT TELL YOU ABOUT IT UNLESS YOU ASK!

For individuals, an FTA may be requested for failure-to-file and failure-to-pay penalties. For businesses, an FTA may be requested for failure-to-file, failure-to-pay, and failure-to-deposit penalties. In order to qualify for a First-Time Penalty Abatement, an individual or business must meet the three clean compliance criteria. These criteria are as follows:

1. Filing Compliance:

The taxpayer must have filed all currently required returns and they must not have an outstanding request from the IRS for an unfiled return.

2. Payment Compliance:

The taxpayer must have paid, or arranged to pay, any tax that is due.

3. A 3-year Clean Penalty History:

The taxpayer cannot have had penalties of a “significant” amount assessed in the prior three years on the same tax return. (In practice, any penalty is a significant amount)

If you have had a filing or payment penalty assessed against you, and you believe that you meet the preceding three criteria, you may be eligible for the first-time abatement waiver. In this case, you should contact a tax professional that can confirm that you qualify, and if so, further point you in the right direction.

In 2010, the average failure-to-pay abatement was $84, and the average failure-to-file abatement was $240. At Max Tax Agency, we will be glad to help you determine if you qualify for the first-time abatement waiver. If you have any concerns about any penalties that the IRS has assessed against you, we are here to answer your questions.