You are paying more taxes to the government than you need if not claiming all the tax credits and deductions. Tax credits and deductions from income are reported on lines 206 to 485 of your income tax return. Therefore, take some time to review them very carefully.
What can you deduct from your taxes?
Income taxes collected from individuals and businesses represent the government’s largest source of tax revenue and involve about 8% of GDP being transferred from public wallets to the federal treasury every year. People often leave money on the table like in saving for retirement and claiming government benefits. We wanted to know if the same thing was happening when you file your taxes.
Furthermore, people tax filers can pick whether to itemize deductions like for charitable giving, mortgage interest or even claim a standard deduction. Keep in mind that itemize needs some efforts but can provide large tax savings. Picking for the standard deduction saves your time but can result in a larger tax bracket.
We exploited this option to calculate the costs of filing income tax return. If compliance costs do not exist, you would presumably itemize if the advantage of doing so is bigger than zero. Itemizing is beneficial only if there are costs and it reduces the tax price by more than the costs of itemizing. If you are living in any other country like Hong Kong, them must review American tax for US residents living Hong Kong and calculate your deductions.
Here are a few common questions asked by taxpayers:
- What if I have filed my tax but forgot to claim deductions?
In this case, the solution is revised return. One can file a revised return while claiming all the deductions. Also, a revised return can be filed to the end of the relevant assortment year.
- I could not file my tax, will still get deductions
Yes! You can file a belated return and claim all the deductions. In case you still forgot to claim, the government provides you further chance. You can go to the assessing officer and ask him to give a notice.
What are tax credits?
It’s fall into two categories- 1) refundable and 2) non-refundable.
Refundable tax credits like the federal GST, HST tax credits are government tax refunds. Also, they are paid out automatically frequently in a series of payments throughout the year.
Non- refundable tax credits like tuition fees are applied directly to the tax bill or cut the amount of tax your owe. Also, they are not paid out directly. In order to claim, you have to owe tax.
Report All Your Income
Some individuals fail to report all their income on their tax returns. This oversight can cost you. If you have unreported income and the internal revenue system uncovers it, then you are looking at interest as well as penalties for unpaid taxes. But you won’t get a free pass when make an honest error. Thus, review very carefully to your return and ensure you don’t forget any earning source. Often it is 1099 incomes such as interest income, dividends and contract work that is overlooked.
Important USA Tax News 