5 Tax Mistakes to Scrap in 2017
Understanding common tax-prep and filing pitfalls before the end of the year can help you get organized so you'll be able to maximize opportunities for deductions come April.
USAA called on financial pros to identify the most common mistakes filers make and explain how you can avoid them.
1. Waiting too long to start. Most people think about taxes after the holidays have passed. By then, it might be too late to take advantage of some tax deductions and strategies.
"If you plan to sell some investment losers or make charitable gifts, that needs to be done before the end of the year," says JJ Montanaro, a certified financial planner with USAA. "Retirees with low enough income might be able to take a voluntary distribution from their retirement savings."
2. Failing to itemize. When filing, you can choose either the standard deduction or to itemize your expenses. Don't assume the standard is right for you.
"Some people take the easy way out instead of itemizing," says Lisa Greene-Lewis, a certified public accountant and tax professional with TurboTax. "You can itemize even if you don't have home mortgage interest and property taxes. Say, if you gave a lot of charitable deductions combined with other expenses.
Bonus Tip: TurboTax's ItsDeductible app lets you track charitable contributions as you give.
3. Not asking for help. "Maybe you're selling a rental property or trying to account for the fact that you're taking care of your parents," Montanaro says. "There are situations where it's worthwhile to call in the cavalry."
Bonus Tip: The IRS and the Armed Forces Tax Council offer free tax help to military members and their families.
4. Passing up tax breaks. According to the IRS, 20 percent of eligible taxpayers don't claim the Earned Income Tax Credit. There are other breaks many don't know about. "If you're caring for your parents or have adult kids move back in, you may be able to claim them as a dependent," Greene-Lewis says.
5. Ignoring the results. "If you got a big tax refund last year or you had to write a big check, that should be a red flag to check your withholdings or how you're making your estimated payments," Montanaro says. "Make sure you don't keep repeating that mistake."
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