With Tax Day less than a month away, we all want to avoid costly mistakes that can result in a higher tax bill or a delayed refund. In support of United Way’s work to help everyone in every community achieve financial stability, H&R Block has partnered with United Way in order to bring MyFreeTaxes to people making under $64,000, which is the equivalent of 70% of the U.S. population. In addition to MyFreeTaxes, H&R Block experts offer the following tips to minimize mistakes and to maximize your refund this tax season.
1. Choosing a filing status
One of the most common mistakes taxpayers make is selecting the wrong filing status. A taxpayer’s filing status can affect which credits and deductions they’re eligible for, the value of their standard deduction and their tax bracket.
One situation that can make choosing a filing status difficult is when more than one filing status seems to fit. For example, if a taxpayer with children is in the process of getting a divorce, they may not be sure if they should file as married filing jointly or married filing separately or, in some instances, whether they qualify to file as head of household.
2. Common clerical errors taxpayers make
Taxpayers should double check their tax returns and make sure they haven’t made any clerical errors, like mixing up names and Social Security numbers, forgetting to include information reported on the W-2, 1099 or other forms, transposing numbers and making math errors.
3. Commonly overlooked credits and deductions
The thousands of changes to the tax code in the past decade make it no surprise some taxpayers miss out on available tax benefits.
4. Earned Income Tax Credit for lower-income workers
One of the most frequently overlooked tax credits is the Earned Income Tax Credit (EITC), which 20 percent of eligible taxpayers don’t claim. Depending on their income and the number of children they have, lower-income workers may be eligible for an EITC of $506 to $6,269.
Because eligibility can fluctuate based on financial, marital and parental changes, a taxpayer can be ineligible one year and eligible the next. Another reason so many people overlook the EITC is because they may not earn enough money to have to file a return. The EITC is a refundable credit, so even if an eligible person does not owe taxes, they can still get the EITC.
5. Education benefits
Education credits are another often-overlooked benefit. Depending on the kind of academic program, what year the student is in, income and other restrictions, a student may use the American Opportunity Credit of up to $2,500 or the Lifetime Learning Credit of up to $2,000. Taxpayers who paid tuition and fees in 2016 may be able to deduct up to $4,000.
6. Itemizing deductions
Only about 50 million taxpayers itemize even though millions more should – especially many of the 86 million homeowners. 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 qualifying:
personal property taxes,
real property taxes,
state income or sales taxes,
mortgage interest payments and
certain 2016 mortgage insurance payments.
Itemizing can save taxpayers hundreds of dollars. For example, if a single taxpayer pays $9,600 in mortgage interest, property taxes and charitable donations, that is $3,300 more than the standard deduction of $6,300. With a marginal tax rate of 25 percent, itemizing saves this taxpayer up to $825.
Kathy Pickering is the executive director of The Tax Institute at H&R Block, the go-to source for objective insights on federal and state tax laws affecting the individual. With more than a decade of experience in tax operations and 25 years in information technology, Pickering is responsible for the strategic direction and management for a team of the nation’s top experts on tax issues. As head of The Tax Institute, Pickering oversees enrolled agents, CPAs and attorneys who provide information and analysis on the real-world implications of tax policy and tax proposals.