Black Money: Tax Mistakes You Want to Avoid

Gentlemen (and ladies), start your engines. Tax Day is less than a week away.

But as you race toward the finish line, be mindful of common tax-filing errors. Some mistakes could cost you money. Others could raise red flags at the IRS. Tax software will do math and point out tax breaks you might overlook, but these programs are only as good as the information you enter.

Here are some common last-minute blunders, and how to avoid them:

Automatically not itemizing.

A 2002 study by the Government Accountability Office found that more than 2 million taxpayers who claimed the standard deduction could have lowered their tax bills by itemizing.

Deductible expenses include interest on your mortgage, property taxes, charitable contributions and unreimbursed medical expenses that exceed 7.5% of your adjustable gross income.

Ordinarily, that threshold puts the medical-expense deduction out of reach for most taxpayers who have employer-provided health care.

But the economic downturn has led employers to shift more of the cost of health care to their workers in the form of higher deductibles, co-payments and co-insurance. That means more taxpayers could rack up enough unreimbursed expenses to claim the deduction, says Mary Canning, dean of the schools of taxation and accounting at Golden Gate University in San Francisco.

Automatically itemizing.

 

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