CPAs: Some tax filers miss easy deductions, credits
Published 8:02 am Monday, February 13, 2012
By MOLLY DUETT
Filing taxes may save citizens of Decatur County more money than they previously thought, local experts say. Tax law changes from year to year and those areas that change can cause confusion for taxpayers, according to Rodney Prince, Certified Public Accountant (CPA).
Prince said that errors typically occur with people not knowing a lot of the deductions that are available and not knowing a lot of the tax credits that are available.
“The biggest change for us and our clientele is that basically for most business people and farmers if you buy a piece of equipment, you can write the entire piece of equipment off in one year,” said William Burke, CPA. “And that by far has been the biggest savings that we’ve seen for taxpayers in Decatur County.”
For example, if someone bought a $400,000 piece of equipment for his or her farm and placed it in service during 2011, that owner could write the entire $400,000 off, Burke said. In previous years, citizens had to allocate that sale over a seven-year period.
A tax credit is a dollar-for-dollar reduction in a person’s taxes that they owe, and an area where credits are slightly different this year is residential energy credits. Starting in 2010, taxpayers were receiving large credits for buying and installing energy efficient products for their homes such as windows and air conditioners.
According to Burke, that has now been greatly reduced to a credit of $500 for a person’s lifetime. This means if a citizen already took advantage of the residential energy credit in 2010 or in 2011 and it paid $500, then that citizen will no longer qualify for the credit. However, anyone who hasn’t already used up the credit can still qualify for up to $500.
“That was a 2010 thing where the Obama administration was really encouraging people to do things for energy efficiency and to bolster the economy,” Burke said.
Further information on the specifics on residential energy credits can be found on Energy Star’s website.
Other areas where taxpayers can save money, by earning credits, is by making donations to the Salvation Army or Goodwill. All taxpayers need is a receipt from the organization and they can go on the Salvation Army or Goodwill websites to judge how much money to count their donation from a chart, which lists items such as refrigerators to sweaters.
Teachers can also write off up to $250 for school supplies that they paid for out of their own pockets, Burke said. That also applies for people who help out with their church or charities and pay for supplies.
Education credits for going to college is yet another area that taxpayers do not typically think of, according to Burke. The most a taxpayer can claim for their first four years is $2,500 over the course of that four years. After completing that initial tax credit, they can qualify for deductions if they decide to seek further education.
“Where they lose so much money on the table are in the credit areas, and the educational credits are probably the highest area that we see,” Burke said. “Most people, now, when they have investments, they have some kind of foreign tax credits that they leave off the table without deductions.”
The deadline day for taxes this year has been extended to April 17. This is due to April 15 being on a Sunday and that Monday, April 16, is Emancipation Day, a holiday observed in the District of Columbia.