If you're a doctor who worries abouttaxes after each April 15, you may beworrying needlessly. A new study by theUS General Accounting Office (GAO) indicatesthat millions of taxpayers are notclaiming the deductions to which they areentitled. In fact, in 1998, as many as 2.2million taxpayers overpaid Uncle Sam by acollective $948 million, or more than $430per taxpayer. Some taxpayers may haveoverpaid by as much as $5000.
New York Times
According to a recent report, there are 7 key deductions thattaxpayers often fail to take. One of themost common is a home-office deduction.Individuals who run a business outof their home don't take a home-officededuction because they fear doing sowill raise a red flag for the IRS.
Other deductions that taxpayers oftenfail to take include job-search expenses,used clothing or furniture donations tocharity, points paid on a mortgage, casualtyor theft losses, investment advisoryfees, and tax-preparation costs.
FOLLOWING THE STANDARD
In some cases, fear of the IRS is an evengreater factor than simple oversight.Some taxpayers say they don't itemize ontheir return because they don't want toinclude anything the IRS might call intoquestion. Many say they are willing to payextra for the peace of mind of not receivinga letter or visit from the IRS. In addition,many taxpayers simply don't botherto keep the records necessary to documenttheir deductions.
The GAO report found that almost 1million taxpayers in 1998 simply chose the"standard" deduction (ie, the flat dollaramount based on the taxpayer's filing status)rather than itemizing when filingtheir return. About 70% of individualincome tax returns claim the standarddeduction each year.
These taxpayers overpaid their taxesby a total of approximately $473 million,because they didn't itemize mortgagecosts as well as state and localincome taxes. The GAO study alsorevealed that a tax professional preparedalmost half of the returns thatoverpaid taxes because deductions werenot itemized on Schedule A.
It can also be difficult to properlyvalue items like used books, clothing, andfurniture that you plan to donate tocharity. Tax advisors suggest checking theprice of comparable items on the onlineauction site eBay (www.ebay.com) orthrough the software package It'sDeductible(800-976-5358; www.itsdeductible.com), which estimates the market valueof about 1000 household items.
If you're thinking twice about your2002 tax return, or returns from prioryears, it isn't too late to correct any errorsof omission. You can fix these errors by filingan amended return on Form 1040X.The form is free and is available on the IRSWeb site (www.irs.gov).