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Commonly Missed or Misused Tax Deductions: What are the Pros Saying?

Commonly Missed or Misused Tax Deductions: What are the Pros Saying?

Tax season has officially begun! Keeping up with ever-changing tax laws can be exhausting and there are always missed tax deductions that taxpayers overlook that can affect their refund. Today we're chatting with industry leaders, tax experts and small business owners to see what their thoughts are on what the commonly missed or misused tax deductions are. 

  • If you got married or divorced in 2017…Do you file as a single or married person on your return?
  • Are there any tax planning strategies to get around the new SALT tax deduction limitations?
  • Tax reform brought new education saving options. What is the most often overlooked tax saving option when it comes to saving for education?
  • Many taxpayers do not use fully fund their IRAs? What are some overlooked saving strategies?
  • Most taxpayer's that are hit by the AMT are unaware that the AMT computation does not have a standard deduction but does allow certain itemized deductions. What are some of the most common overlooked itemized deductions?
  • Business start-ups often overlooked their initial set up and organization costs. What are the options to save on taxes?
  • An extension does not mean that you are not required to pay the tax. What are the most common mistakes made by DIY users when it comes to filing?
  • What is the most common mistake tax pros see when reviewing tax returns?

These are just a few of the questions the pros discussed and debated in today's very active live Twitter chat session.

We know how busy everyone is, so thank you to everyone who took the time to participate! Be sure to check out the highlights of the chat below.

@TaxBuzzOnline will be hosting a #TaxBuzzChat on Twitter the first Wednesday of every month at 10am PT/1pm ET. Our next chat will be Wednesday, March 7th. Don't miss out on the next hot topic! Tweet us if there are topics that you'd like to chat about or have questions about.

Q1. If you got #married or #divorced in 2017…Do you file as a #single or married person on your return? #taxbuzzchat pic.twitter.com/eyTte4IAGR

your marital status on 12/31/17 determines which filing status you choose. #taxbuzzchat

A1. If #divorced last year your filing options are single or head of household (provided you paid more than half the cost of maintaining a household for a qualified child or dependent relative #TaxBuzzChat

your marital status on 12/31/17 determines which filing status you choose. #taxbuzzchat

Your marital status on Dec 31st is the deciding factor. #taxbuzzchat

A1. If you are #separated (not divorced), you can still file jointly. Other options are married separate or head of household (must live apart last 6 months & pay more than half the cost of a household for a qualified child #TaxBuzzChat

Your status is determined by whether you are married/divorced/single, etc, on the last day of the year.#TaxBuzzChat @taxbuzzonline

A1. This is a 3 part answer to get ready #TaxBuzzChat

If #married during the year the only two options are married filing jointly with your spouse or married filing separately. https://t.co/LprDyQLdU3

#TaxBuzzChat Q1. if you are divorced, you may file as single or HOH (if you have a child).

Q4. Are there any #taxplanning strategies to get around the new #SALT tax deduction limitations? #taxbuzzchat #taxtalk #Taxtips #taxseason pic.twitter.com/6S9S3zlqhv

A4. I've suggested that families who currently hold second homes - but do not regularly use them - consider flipping to rentals. #TaxBuzzChat

In addition to what @LeereamsSr has to say..Since some of the high income tax/ property tax states are working to alleviate this, I would wait to see what happens there & incorporate it in my tax planning strategy. #taxbuzzchat

A4. If you are paying taxes on unimproved real estate and are over the $10,000 limit you can elect to capital the taxes (add to your cost basis).#TaxBuzzChat

A4: This one will depend on whether you have SALT taxes over $10,000 per year and if you have enough other itemized deductions to make it beneficial to itemized. The old doubling up technique isn't as useful after 2017's #TaxReform.#TaxBuzzChat @taxbuzzonline

A4 States with high tax rates are actively considering their "work around" as regards the new SALT limitations 2018-2025. Answer will be state specific and is yet TBD. Watch NY, NJ, CA #Taxbuzzchat https://t.co/8NlUbGJZ3s

#TaxBuzzChat > In #California, Senate Bill 227 creates the California Excellence Fund and provides a credit against state income #tax liability for contributions in the fund. via @taxfoundation https://t.co/rQe5BjRbRs https://t.co/IGp9gb13Lv

Q4: CA has put a bill to allow you to make a charitable contribution to a CA fund in exchange for a charitable deduction; I don't see how the fed will accept this. A donation is a free will gift, not a scheme to get tax savings. #TaxBuzzChat

A4 In states like MI where 1/2 of property taxes are paid semi-annually, taxpayers can choose which calendar year to pay. In some cases, paying 3 halves in 1 calendar year will get over the (now larger) standard deduction.

#taxbuzzchat CA is trying a legislative work-around for the SALT by converting property taxes to charitable contributions. Let's see if this passes the Assembly. @TaxTweet

Q5. #TaxReform brought new #education saving options. What is the most often overlooked tax saving option when it comes to saving for education? #TaxBuzzChat #TaxSeason #taxtalk #taxtips #taxsavings pic.twitter.com/ClPE2LH1Ct

A5. Frequently overlooked is the fact that #Coverdell accounts can pay for grammar and high school tuition while #Sec529 plans only to college level tuition. Beginning in 2018 that is changed #TaxBuzzChat#taxtips #taxseason

A5. Post-tax reform, the ability to use savings plans for private and religious elementary and high school expenses is a game-changer for some families. #TaxBuzzChat

A5. Post-tax reform, the ability to use savings plans for private and religious elementary and high school expenses is a game-changer for some families. #TaxBuzzChat https://t.co/6Mox2t5aTW

Q7. Many #taxpayers do not use fully fund their #IRAs? What are some overlooked saving strategies? #TaxBuzzChat #IRA #taxtips #taxtalk #taxseason #taxpros pic.twitter.com/tJXHE3EBkL

A7: make smaller contributions throughout the year rather than trying to fund your #IRA with one payment at end of year. Try to contribute with each paycheck. Also, make sure you're contributing to your 401(k) if that's an option.#TaxBuzzChat

A7. Divert funds directly to a plan. Most folks hate to see money leave their bank account but if the cash never makes it to the account, you won't miss it as much.#TaxBuzzChat

direct contributions is a great move. It's a particularly good strategy when you get a raise. If you don't desperately need the extra cash, bump up your percentage contribution to your 401(k) #taxbuzzchat https://t.co/zM5dZKGbLS

A7. Many brokers scare taxpayers into thinking you have to deposit big dollars at once. Find one that lets you contribute at your own pace, even if only a few dollars per pay period.

Minimum contributions (& related shaming) are a big scare factor for many taxpayers.#TaxBuzzChat

Q7: #1 The best way to save is if you have a 401K at work, contribute enough for company match, then do a Roth IRA, then continue funding the 401K. Roths will be worth it long term to save future taxes on earnings. #TaxBuzzChat

Q7: #2 If you are allowed a Roth component at work, make a contribution to that, giving up deduction on contributions now to save taxes on earnings in the future will probably save a ton on taxes in retirement. #TaxBuzzChat

A7. If your employer raises your 401K match %, be sure you don't miss out.  Do a 401k contribution to get every employer match $$! #TaxBuzzChat  #taxtip

Q8. Most #TaxPayers that are hit by the #AMT are unaware that the AMT computation does not have a standard deduction but does allow certain itemized #deductions. What are some of the most common overlooked itemized deductions? #TaxBuzzChat #taxtips #Taxseason #taxtalk pic.twitter.com/BUZf9HZDAX

A8. Wait, itemized deductions still exist, post-tax reform? Haha.

I would say mileage is grossly overlooked - charitable and medical, in particular.#TaxBuzzChat

I would also say Charitable contributions are also overlooked sometimes. #TaxBuzzChat

A8. #Taxpayers can force itemized deductions even is less than the standard and many times get a lower tax when subject to the AMT#TaxBuzzChat

A8. If you're lucky enough to get to deduct medical expenses, don't forget long-term care insurance premiums! #TaxBuzzChat

Q10. #Business #Startups often overlooked their initial set up and organization costs. What are the options to save on #taxes? #TaxBuzzChat #taxtips #businesstips pic.twitter.com/eoaecyRjWU

A10. Be sure to keep track of your business related expenses in the "start-up" phase.  Lots of deductions lost in start-up due to lack of organization/documentation. #TaxBuzzChat

A10 - there are many answers but one thing is to start the business quickly to get out of start-up phase. Most startups I see need to minimize their losses rather than save on taxes for the first couple years. #TaxBuzzChat

A10. They can elect to deduct in the first, rather than amortize over 15 years up to $5,000 of organization costs and $5,000 of start-up expenses. But that is not always the best option.#TaxBuzzChat

A10 Elections are always important to consider.

Similarly, for a start-up with low income first year, I often elect out of Bonus depreciation, to spread that deduction to years where income will be higher. #TaxBuzzChat

Q10 #Business #Startups have special IRS deductions provided to them: Up to $5K each for Qualified "StartUp" costs and another $5K for Organizational costs; i.e. your partnership or corporation formal agreements. For Startup "costs" research before you use - Ask.  #Taxbuzzchat https://t.co/6pbTPNKyFz

Q12. An extension does not mean that you are not required to pay the #tax. What are the most common mistakes made by DIY users when it comes to filing? #taxextension #Taxseason #taxtime #taxtips #TaxBuzzChat pic.twitter.com/cGqmcI4uXz

Waiting until the very last minute & then overlooking tax breaks in rush to get forms to IRS. Just get an extension (and pay what you owe) then do your returns right! #taxbuzzchat https://t.co/gDNhftp4bs

A12: Forgetting to file the extension or thinking because it's automatic, that they don't need to file it. #TaxBuzzChat

Q12: Not paying SE tax on returns or not paying a big enough payment with an extension, so owe penalty and interest from April 17. #TaxBuzzChat

Not paying with the extension because they think it is automatic. #TaxBuzzChat

Q13. What is the most common mistake tax pros see when reviewing tax returns? #TaxReturns #TaxBuzzChat #Taxseason #taxtime #taxtips #taxpros pic.twitter.com/d7FpEYH32x

A13: some people seem to be afraid to claim all the deductions they are entitled to. Most commonly medical and charitable. They think they'll get audited if they report too much.#TaxBuzzChat

Ditto for business.#TaxBuzzChat

If it's ordinary and necessary, go for it!

A13: Not coordinating who is claiming the kids when the parents are divorced. I've seen both try to claim, and I've seen where neither claimed because they they other one did.#TaxBuzzChat

All kinds of mistakes on DIY Rental Income reporting: You name it, missing expenses, wrong basis for depreciation or NO depreciation! Passive income limitations is a mind boggling maze. #taxbuzzchat

A13. Head-of-household filing status, because of its complicated qualification is frequently misused and a frequent IRS and state audit target.#TaxBuzzChat

A13.

"Turbotax told me I could do this."

Nope. Sorry.

You're trying to file MFS for no good reason AND both claim full mortgage interest and property tax deductions.

Step away from the computer.

A13 Not having good records to substantiate. #IRS just settled for me this week a 2012 audit (in client's favor) where good records proved to be deciding factor.#TaxBuzzChat

#taxbuzzchat A13. Not verifying estimated payments and carryover payments.

#taxbuzzchat A13. Not claiming credits to which they are entitled.

— TaxMama® (@TaxMama) February 7, 2018

To see the full chat session, click here.

We had a great time chatting with our participants on such a hot topic. Feel free to use our #TaxBuzzChat hashtag or tweet us at @taxbuzzonline if you have any additional questions you'd like answered.

We'll be hosting #TaxBuzzChat the first Wednesday of every month at 10am PT/12pm ET for our monthly discussion on all things tax and accounting. 

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TaxBuzz Staff

TaxBuzz Staff

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