Doing your taxes is time-consuming. There are a variety of choices on how to proceed. Taxes can be done online, or using a proprietary software package. Some taxpayers still use the old-fashioned method of pen and paper. Others prefer to hand the whole process over to a professional accountant. Whichever method you choose, you will still have to collect all those records related to income, mortgage payments and deductions so that you can comply with the law and claim all the credits due to you.

With so many different tax deductions that are available, it is no wonder that so many seem to overlook several that could benefit them in their family. Every American is looking for ways in which he or she can hold on to their earned income and pay less in taxes. In fact the IRS stated that in 2005 over 843 billion dollars were claimed for personal exemptions on taxes.

Deductions: Itemize or claim the Standard Deduction?

One of the decisions that could have them most impact on your tax return, financially, is whether you choose to take the standard tax deductions or itemize your return. If you are single tax payer and choose standard for your deduction you could claim $5,350. If you are married-filing-jointly the amount is doubled. Head of household, and single the deduction comes to $7,850.

One of the decisions that could have them most impact on your tax return, financially, is whether you choose to take the standard tax deductions or itemize your return. If you are single tax payer and choose standard for your deduction you could claim $5,350. If you are married-filing-jointly the amount is doubled. Head of household, and single the deduction comes to $7,850.

When a large portion of the American Taxpayer chooses not to itemize their deductions, the government is left with a huge overpayment by those same taxpayers. In 2002, Congress found that 67% of taxpayers chose not to itemize their returns. By taking only the standard deductions, these taxpayers lost an average of $438 in potential returns. While $438 may not seem like a lot of money to the American government, this average rate of overpayment by the public amounts to an estimated $945 million in taxpayer losses. That figure makes it easy to understand why the government provides an ‚easy, standard‘ way to calculate your taxes. Perhaps next year you will think twice before choosing the standard deduction!

Itemizing is a lot of work even if your accountant does the filing, because you have to gather all the information. The taxpayer is responsible for accumulating the records to prove their position and then get it to the CPA or a tax person in a timely manner. Most of us don’t bother to keep records all year round and this can be a really time consuming process which more often than not gets deleted from the „to do“ list.

You don’t have to own a home to save money by itemizing on your taxes. All renters can itemize such as fees for advice on investment, making large purchases like a car or appliances. There are so many items can be deducted on your tax return. Collecting this information may pay for itself on your yearly tax returns. You can use sales tax in place of state income tax if you don’t pay income tax in your state.

Even if you’re not a homeowner, don’t neglect the money-saving possibilities that itemizing might provide. Many expenses that can be itemized are not tied to home ownership. Renters donate to charities, travel on business, pay medical costs, run up miles on their cars, incur trustee or investment fees, and are expected to pay taxes. Itemizing will allow you to deduct your state’s income tax, or to detail the sales taxes you paid if your state does not levy a tax on income. Sales tax in particular can be substantial if you make a large purchase, say an automobile or a great new television. All these costs should be evaluated as potential deductions on your taxes, and with proper record keeping, you will be positioned to take advantage of them.

Ron Finkelstein is NOT a tax lawyer or a Certified Public Accountant. He is plainly a entrepreneur that’s forked out too much money throughout the years in order to understand tax tips like greater understanding
of what is the difference between standard deduction and itemized and top ten missed tax deductions