As we start tax filing season 2020 I thought it might be a good idea to go over some mistakes that are easy
to make when filing your return. All won’t apply to you but one might save you money.
“Tax simplification” was one of the big selling points of the tax law passed in late 2017 that first affected
our returns filed in 2019 for the 2018 tax year. One of the biggest simplifications came because the
Standard Deduction was doubled, and that caused many more taxpayers to use the Standard Deduction
instead of going through all those tax, medical and charitable contribution receipts to Itemize. If you’re
used to itemizing, you probably are also used to including your state tax refund as income. However, if
you did not itemize on your 2018 return, your state refund is not included in your 2019 income, even
though you received a 1099‐G from your state Department of Revenue.
If you do itemize your deductions, you probably know that you must have documentation for your
charitable contributions. If your contribution is $250 or less, a cancelled check will suffice but if your
contribution is more than $250, you must have a receipt from the charity. But what about good deeds,
like work in a local food kitchen where you’re giving your time, but also making food donations. That
counts as long as you keep your receipts (and get an acknowledgement if over $250). Also, if you drive for
charitable purposes, like delivering meals, your mileage is added to your contribution at 14 cents per mile.
Do you play the Lottery? If you do, and you win, be sure you keep those losing tickets too (yes, you will
have losing tickets). Lottery (and any gambling) winnings are included in taxable income. You can’t directly
offset your winnings with losses though. Your losses are included as itemized deductions (so you have to
have enough total deductions to itemize) and you can only deduct losses to the extent of winnings.
Have you served on a jury? Many employers will pay their employees their regular pay while they serve
on a jury, and the Court will also pay you for your service, although it’s generally a very small amount.
Sometimes the employer will ask you to give the money you receive from the Court to them in exchange
for your regular pay. Because jury duty pay from the Court is included in taxable income, you can deduct
the amount you paid to your employer, so you’re not taxed on money you weren’t able to keep.
The last one I’ll mention this week is a significant change implemented in the 2017 Tax Act affecting the
deduction for dependents. Previously each person in your family was an exemption, and your total
exemptions were deducted from your Adjusted Gross Income. Now there are no exemptions, but in its
place, we have tax credits for dependents. For any child under the age of 17, the child tax credit is $2,000,
which is deducted from your tax liability. For any dependent age 17 or older, the credit is $500. And
remember, this credit is for any qualified dependent, so children age 17 and older qualify but if you have
an older relative that you’re caring for in your home, you get a $500 credit for that person as well.
Of course, this is not a complete list. I’m just trying to make you aware of some items that are easily missed
or common errors. Over the next few months I’ll try to cover items that are useful and help you pay the
least tax legally possible. As always, I am looking for article ideas that you would like me to cover. If you
have an idea for a future article, or just have a topic you would like more information on, please send me
an email.