Here's a tip for those postponing taxes until this month's deadline: Compile old receipts and itemize what you can.
Tax Day is April 17 this year — because the 15th falls on a Sunday and the 16th is a holiday in some areas — and the Internal Revenue Service reports receiving more than 94 million tax returns so far. For millions who still have not filed, that means two weekends of sorting financial records or simply choosing the standard deduction.
“They kind of call us because they have a hunch they are missing out on things.” Matt Jones, a CPA and owner of Jones & Company, says an increasing number of people are coming to his firm with an interest in itemizing.
A National Bureau of Economic Research study found many opt for the latter instead of itemizing. This time-saving approach can reduce refunds by hundreds of dollars.
“Itemizing deductions requires some effort cost but can provide large tax savings. Claiming the standard deduction saves time and effort but results in more taxes due,” wrote Youssef Benzarti, author of the study called “How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs.”
Mr. Benzarti, an assistant professor of economics at the University of California, Los Angeles, reviewed those just above the standard-deduction threshold. There, he found a gap in which filers declined to itemize despite savings.
“People leave $600 on the table to not bother itemizing. That's probably the hassle cost it imposes on them to monetize it,” Mr Benzarti said in an interview.
He further determined an estimated cost, combining unclaimed funds and time to file — for those in the 15 percent and 28 percent marginal tax brackets. They ranged from $175 for single filers in the lower bracket to $591 for joint filers in the higher division.
Mr. Benzarti scaled his estimates over a growing number of forms to file and average time to complete. He determined total cost for everyone filing taxes is about $200 billion.
“The aggregate cost of filing federal taxes has been steadily increasing over time since the 1980s in part because of population growth but also because of the increase in the number of forms filed by each taxpayer,” Mr Benzarti wrote in his report.
Most people claim the main deductions of state and local taxes, charitable donations, and mortgage interest — the latter of which involves compiling data from bank information, he said.
There are other countries that pre-populate tax forms, allowing taxpayers to simply approve the filing. Mr. Benzarti compared to a credit-card company asking customers take note of every item purchased and sending it for the company to check.
Many who itemize see a refund and are pleased with the results, said Matthew Jones, a certified public accountant who owns Jones & Company LLC in Toledo and Sylvania.
“Every couple hundred dollars, three hundred dollars, to a middle-class, hard-working Toledo family can really help them a lot,” Mr. Jones said.
Some itemized deductions that filers do not consider are charitable miles driven, non-reimbursed job expenses, and investment expenses, Mr. Jones said.
Mr. Jones said as a CPA, he finds clients are interested in delving deeper into their taxes. Staff are often able to help them over the standard deduction, he said.
“They kind of call us because they have a hunch they are missing out on things,” Mr. Jones said.
Tom Baird, a certified public accountant and president of ToledoCPAS.com, said a good CPA digs through records with knowledge and experience.
“You hear things, little cues, that tell you need to hear more about this,” Mr. Baird said. “It's not what you bring us, it's what you don't bring us.”
Mr. Baird suggested private mortgage insurance, points paid to refinance, and investment expenses as some of the larger deductions filers may not consider.
“A lot of people don't know that, and I can't tell you the number of times I've amended a return for any of those items,” he said.
Federal revenues totaled about $3.3 trillion in fiscal year 2016. About 47 percent of that comes from individual income taxes, according to the Center on Budget and Policy Priorities, a nonpartisan research organization.
Many taxpayers across Toledo and the region are still filing. A city spokesman said Toledo collected $176,362,000 in income tax last year and projects $178 million this year. Nearly 51,700 returns were filed in 2017.
More people filing means an increase in reported scams as well. The Ohio Attorney General's Office said its center logged about 340 reports of tax scams compared to roughly 160 in January and 280 in February.
Most commonly reported are callers purporting to represent the IRS. The scammer claims the federal government is seeking action against the potential victim for tax problems and demands an immediate call-back with payment to resolve it.
Taxpayers should avoid making payments over the phone and distrust callers demanding payment using gift cards or wire transfers.
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