All Tax saving tips – The Most Common Errors

Overlooked Deductions or Credits

1.     State-tax refunds for AMT taxpayers:

Taxpayers often forget that state tax refunds aren't taxable to those who owe alternative minimum tax, or AMT, for the same tax year, as long as the amount of the refund is less than the amount of state income tax disallowed under AMT.


2. Charitable donations, Part I:

Donors may not deduct labor or time, but they may deduct expenses such as mileage, uniforms and even the cost of taking some underprivileged youths to sports events or movies. Board members or chosen representatives also may deduct unreimbursed expenses for attending a conference or meeting. For details, see IRS publication 526.


3. Charitable donations, Part II:

 Employees who give to charities via payroll deductions at work frequently forget to include them on their personal return. "The number is on the W-2 and there's no letter," says Melissa Labant, an expert with the American Institute of CPAs.


4. Medical expenses
  The disallowance equal to 7.5% of adjusted gross income is a high hurdle, but those who qualify shouldn't overlook all possible expenses, listed in IRS publication 502. Or you might want to consider filing separately if one partner has high medical bills.

5. Sales-tax deduction in lieu of income taxes
  This provision, which Congress has extended through 2011, allows itemized deductions for state and local sales tax instead of state and local income taxes. Taking this is a no-brainer in states without an income tax, and it may work for others if state income taxes are relatively low but a taxpayer had big-ticket purchases such as a car, boat or engagement ring, according to H&R Block (HRB: 16.20, -0.05, -0.31%)'s Tax Institute.



6. Moving expenses
 Taxpayers who moved more than 50 miles for work and stayed employed may often deduct reasonable moving expenses. No itemization is necessary. See IRS publication 521.

4 Common Errors:


1. Overstating charitable deductions
 If you attend a charity event, you may deduct only a portion of the ticket cost, which is usually stated in a letter from the charity. This is true even if you don't attend, unless you donate the ticket back to the charity beforehand.

2. Deducting mortgage "points" incorrectly
 Mortgage fees are fully deductible upfront only for the first mortgage on a house. Points on refinancings must be amortized and deducted over the life of the loan.

3. Overlooking the "kiddie" tax
  Children up to age 23 often owe tax at their parent's rate on investment income over $1,900. Information from the parent(s)' return is required to complete the child's, so it should be finished first. For details, see IRS publication 929.

4. Omitting small interest payments
 Banks and other institutions don't have to provide a 1099 form for amounts less than $10, but they still are taxable income. Why do such small amounts matter? An IRS computer may note the discrepancy, and "any unreported income makes the IRS nervous and can lead to more questions," says Ms. Labant of the AICPA.
Source:  http://www.articlesbase.com/taxes-articles/tax-saving-tips-overlooked-deduction-and-common-errors-5764692.html