Did You Pay Too Much Tax in Prior Years?

Article Highlights

Overlooking Tax Benefits
Last Three Years Can Be Amended
Sampling of Commonly Overlooked Benefits
Professional Review

Have you been preparing your own returns? If not, did you have someone prepare it who didn’t take the time to query you about possible tax deductions, credits or filing status options? If you answered either question yes, you could have missed out on a number of tax benefits that could have saved you big bucks in taxes.

If something was overlooked, there is still time to get a refund for 2015, 2016 or 2017 (or even 2014, for some state returns). So if you know you missed something, or even if you just want a professional to look over your past returns to see if something was overlooked, give this office a call.

Here is a list of some (but not all) frequently overlooked tax benefits that may apply to you. Some of these were extended to 2017 in a special bill passed by Congress in the middle of February 2018, so if you filed your 2017 return before that date or used a preparer who does not keep up with changes, there’s a chance one or more items may apply to you. Please note that the items listed below apply to years 2015 through 2017.

Above-the-line Tuition Deduction – Allows a deduction of up to $4,000 for higher education tuition without itemizing deductions.
American Opportunity Credit – Provides a tax credit of up to $2,500 for the first four years of your or your qualified child’s higher education tuition and qualified expenses, even if paid by someone other than you.
Lifetime Learning Credit – Offers a credit of up to $2,000 for tuition and qualified higher education expenses for family members.
Student Loan Interest – A deduction of up to $2,500 for student loan interest paid, which is deductible without itemizing deductions.
Mortgage Insurance Premiums – Premiums on contracts issued after 2006 can generally be deducted as home mortgage interest when itemizing deductions.
Home Energy Efficient Improvement – A tax credit of up to $500 for making certain home energy improvements.
Electric Vehicle Credit – A credit of up to $7,500 for purchase of plug-in electric vehicles, if the manufacturer has not exceeded the 250,000-unit sales limit for qualifying for the credit.
Excess FICA – If an individual had more than one employer during the year and the FICA withholding for the year exceeded the overall FICA withholding cap, the excess is refundable on the 1040.
Consumer Interest – Generally, consumer interest is not deductible. But if a loan is used to purchase a vehicle or other property used both for business and personally, the portion of the interest allocable to business is deductible as business interest (does not apply to employee business expenses).
Surviving Spouse Filing Status – For the two years after the death of a spouse, a surviving spouse with a dependent child can continue to benefit from the married filing joint tax rates.
Head of Household Filing Status – A married individual, separated and living apart from their spouse for the last 6 months of the year, can use the more beneficial head of household filing status, which is normally only available for unmarried individuals.
Saver’s Credit – For lower-income taxpayers making retirement plan or IRA contributions, the saver’s credit provides a credit of 10, 20 or even 50 percent of the taxpayer’s contribution to a retirement plan. The overall cap on this credit is $1,000.
Medicare Premiums – Frequently overlooked either as a medical itemized deduction or for the self-employed medical insurance deduction are the Medicare premiums withheld from Social Security benefits.
Penalty Abatement – Professional tax preparers use a number of tax provisions to have various tax penalties abated, including the late filing penalty, ACA penalty for not having health insurance, penalty for not withdrawing the required minimum amount from a pension plan or a traditional IRA, early retirement plan or IRA withdrawal penalty, negligence penalty and more.
Overlooked Points – Points paid for the purchase of a home are generally deductible as part of the itemized deduction for mortgage interest.
State Tax Refunds – The amount shown on Form 1099-G, the state tax refund a taxpayer received from their prior year’s return, may not be federally taxable or may be only partly taxable. Examples include when a taxpayer claimed the standard deduction on their prior year’s federal return or if their prior year’s federal tax included the alternative minimum tax.

These are just a sampling of items frequently missed by taxpayers and novice tax preparers. If you would like a professional review of your 2015, 2016 and 2017 returns looking for overlooked tax savings, please give this office a call.

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Did You Pay Too Much Tax in Prior Years?