Friday, January 13, 2012

Baker's Dozen of Commonly-Missed Deductions

A tasty baker's dozen of deductions! pic:

The IRS has given us a ton of deductions, but who can remember them all? You can try keeping a book of them, but some encyclopedias seem to have fewer pages! The internet is your friend in this situation, and using the magic of Google you can find all kinds of articles and information on sites such as about the deductions you could be missing out on.

This list is a nice baker's dozen of deductions you could be missing out on, take a quick glance at them and keep them in mind when you file your taxes this tax season. You never know what you could be missing out on, and the IRS sure isn't going to correct you and say, “Hey buddy, you missed a few things, here's your difference.” If you don't get it, they will. It's your money, and you deserve it all in these tough economic times.

1. State Sales Taxes
This deduction is primarily for those residing in states that don't force an income tax. For those states that do have income tax, that tax deduction usually a greater reward. You have to decide on deducting state and local income taxes, or state and local sales taxes. The Internal Revenue Service has tables for residents of states with sales taxes showing how much they can deduct.

If you bought a motor vehicle, boat, helicopter or airplane, you get to add the state sales tax you paid to the amount shown in the information tables from the IRS for your state, but only if the sales tax rate you paid doesn’t exceed the state’s general sales tax rate. The same goes for home-building materials you purchased. even has a calculator to help you figure out the deduction's value, which varies by your state and income level.

2. Charitable Contributions
It’s hard to overlook the big charitable gifts you made during the year by check or other monetary means. The little things add up as well, and you can write off costs you incur while doing good deeds for others, as long as you can prove it with a receipt. Writing off a lot of charitable donations sometimes is a red flag to the IRS, and you have to be prepared for an audit if one occurs. Groceries you usually buy for a nonprofit organization’s soup kitchen, or the cost of soap, sponges and buckets you buy for your school’s car wash fundraiser count as a charitable contributions. For each mile you drove your car for charity in 2011, remember to deduct 14 cents.

3. Moving Expenses For Your First Job in a New Area
You don't have to itemize to take advantage of this deduction, but keep good records of your transactions in the event of an audit. If you moved a distance greater than 50 miles, you can deduct 19 cents per mile of the cost of moving yourself and your possessions, including parking fees and tolls for driving your own vehicle.

4. State Tax You Owed Last Year
If you owed taxes when you filed your 2010 state tax return in the spring of 2011, then your can include that amount with your state tax itemized deduction on your 2011 return. This includes state income taxes withheld from your payroll checks or paid via quarterly estimated payments.

5. Looking Good And Saving Money
It's easy to remember to deduct the cost of travel expenses and hotel stays when you travel for business, but you've got to look the part when you're out in the field. That often means sending suits to the cleaners. Hang on to your receipts (as with anything you want to write off on your taxes) and you can clean up when the total pushes you over the 2 percent limit for miscellaneous deductions.

6. Networking For Cash
The business of doing business as you travel means long-distance calls to speak with contacts, faxes to confirm orders and internet access for research. When you have to pay to stay connected, such as for hotel phone calls or coffee shop internet access, log that receipt and put those fees toward your miscellaneous deductions with the cleaners bill. Be sure you get itemized billing statements from your hotel and receipts of your networking transactions so you have air-tight records.

7. Large Item Charitable Contributions

This is for old furniture or anything else that isn't clothing or groceries, which you can get a nice tax deduction by clearing out your house and donating all of that extra stuff to charity. Always be sure to get an itemized receipt, and if any individual item is worth more than $500, get it appraised by a professional. This contribution is the same as the previous one, in that if you drive your car for your charity work, you can also take the same mileage deductions.

8. Educator Expenses.
Qualified educators can get a $250 “above the line” deduction for the purchase of educational materials such as books, desk supplies, software and computer services, and several other materials that will aid in the education process. To thank our educators, you don’t have to itemize to take advantage of this one.

9. Job-Seeking Costs
Our economy still feels like it's in a recession, even if the rich politicians may say we're not. In the event you're among the millions of unemployed Americans who were actively seeking a job in 2011, track your expenses or try to remember all the expenses you accrued in that time.

If you're looking for a job in the same line of work, you can deduct employment pursuit costs in the category of miscellaneous expenses if you itemize. Such expenses can be written off only to the extent that your total miscellaneous expenses exceed 2% of your adjusted gross income. Some examples of deductible job-search costs include, but aren't limited to food, lodging and transportation if your search takes you away from home overnight for an interview, and costs of postage, personal business cards, resumes, and personal advertising.

10. Jury Pay Turned Over To Your Employer
Most employers pay employees' wages while they serve on jury duty, but for a price. The employees have to turn over their jury pay to the company they work for. The only problem is that the IRS demands that you report those jury fees as taxable income. One benefit is that you get to deduct what you give to your employer.

There's no line on the Form 1040 labeled jury fees, so the write-off goes on line 36, which is for simply totaling up deductions that don't get their own lines. Put your jury fees with the total of your other write-offs and write "jury pay" on the dotted line to the left just so there's no confusion.

11. Office Supplies
This one is easy as you only have to provide your receipt(s) to deduct them from your taxes. This can include supplies for your printer, pens, envelopes, paper clips, and anything else that pertains to your business. Anything you need to purchase to run your business could potentially be a write-off as long as you are prepared to prove its worth.

12. Additional Bonus Depreciation
Business owners can write off 100% of the cost of qualified assets during 2011. This break applies only to new assets with recovery periods of 20 years or less, such as computers, machinery, equipment, land improvements and farm buildings. This can potentially be your biggest tax benefit if you placed business assets in service during 2011.

13. Gambling Losses
You probably already know that you have to report your winnings as income on your tax return from your gambling efforts, even if they were illegal. The flip side of the coin is you can deduct your losses as well. However, only gambling losses can be deducted if you itemize those deductions on your tax return, and the amount you lost cannot be more than your gambling income you reported on the same return. To prove this in the event of an audit, it's important to keep accurate records of your gambling expenditures. Some casinos will give you your winnings and losses in a neat itemized statement, saving you some time.

An important rule to remember is, “If you have to pay for it for work you can usually deduct it.” and anything else: Research is your friend in all situations, and chances are someone has already tried to deduct what you may be trying to deduct. Search the internet and double check if you're filing your own taxes, or write down these deductions and give them to your taxpayer with your receipts. If you're filing electronically, keep your receipts for yourself in the event you are audited.

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