Sheena Smith of Baltimore, Maryland, has used tax preparation software in the past to file her return, but last year the 48-year-old flight attendant sat down with an accountant. The move paid off, since Smith learned she was eligible for a $200 retirement savings credit, a tax break given to those with low- to moderate-income who contribute to a retirement plan. Though she had saved for retirement in years past, “I never got any credit because I didn’t know anything about it,â€ she says.
Such oversights can be costly. In 2009, Kansas City, Mo.-based tax preparation company H&R Block estimated that it found more than $30 million in missed deductions. Though do-it-yourself tax filers often worry that they will underpay and get audited, “when people do their taxes themselves, they typically overpay,â€ says Vinson D. McKennie, owner of V-MAC Financial Services, Inc., in Randallstown, Maryland. And unfortunately, “the IRS is not going to come after you for overpaying.â€
Though you have three years to file an amended return if you missed out on a money saving deduction, the best way to stay on top of changing tax codes is to look for a certified public accountant, enrolled agent or tax attorney who undergoes continuing education courses,â€ says Cindy Hockenberry, research coordinator for the Appleton, Wisc.-based National Association of Tax Professionals. If you choose to go it alone, here are some credits and deductions that are often overlooked.
Saver’s Credit. Most people know they can defer paying taxes on money placed in a 401k account, but like Smith, many don’t realize they may be eligible for a credit, as well. For 2009, married couples filing jointly with an adjusted gross income (AGI) of $55,500 or singles with an AGI ofÂ $27,750 may qualify for a credit of up to $2,000, Hockenberry says.
Energy Credits. If you made certain environment-friendly improvements to your home this year such as installing energy efficient doors or windows or replacing your furnace you may be eligible for a credit worth 30 percent of the cost of the improvements. Many taxpayers missed these credits before when they were introduced through the Energy Policy Act of 2005 but now that they’ve been extended through the American Recovery and Reinvestment Act of 2009, homeowners can still benefit.
Out of pocket charitable contributions. “You go to church and write a check every week — everybody’s going to take that deduction,â€ says James D. Brown, national parliamentarian of the
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