Tax Tips of the Week: April 2, 2013

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by WCCB Charlotte

Perry Webb, President of local accounting firm, Webtax, and an enrolled agent licensed to practice before the Internal Revenue Service and a Registered Tax Return Preparer, offers answers to the most frequently asked questions for the tax season.

Q: How do I know whether to take the standard deduction or itemize my deductions?
A. Itemizing vs. Standard Deduction: Six Facts to Help You Choose
When you file a tax return, you usually have a choice to make: whether to itemize deductions or take the standard deduction. You should compare both methods and use the one that gives you the greater tax benefit.

The IRS offers these six facts to help you choose.
 

1. Figure your itemized deductions.  Add up the cost of items you paid for during the year that you might be able to deduct. Expenses could include home mortgage interest, state income taxes or sales taxes (but not both), real estate and personal property taxes, and gifts to charities. They may also include large casualty or theft losses or large medical and dental expenses that insurance did not cover. Unreimbursed employee business expenses may also be deductible.
 

2. Know your standard deduction.  If you do not itemize, your basic standard deduction amount depends on your filing status. For 2012, the basic amounts are:
• Single = $5,950
• Married Filing Jointly  = $11,900
• Head of Household = $8,700
• Married Filing Separately = $5,950
• Qualifying Widow(er) = $11,900
 

3. Apply other rules in some cases. Your standard deduction is higher if you are 65 or older or blind. Other rules apply if someone else can claim you as a dependent on his or her tax return. To figure your standard deduction in these cases, use the worksheet in the instructions for Form 1040, U.S. Individual Income Tax Return.
 

4. Check for the exceptions.  Some people do not qualify for the standard deduction and should itemize. This includes married people who file a separate return and their spouse itemizes deductions. See the Form 1040 instructions for the rules about who may not claim a standard deduction.
 

5. Choose the best method.  Compare your itemized and standard deduction amounts. You should file using the method with the larger amount.
 

6. File the right forms.  To itemize your deductions, use Form 1040, and Schedule A, Itemized Deductions. You can take the standard deduction on  Forms 1040, 1040A or 1040EZ.
 

For more information about allowable deductions, see Publication 17, Your Federal Income Tax, and the instructions for Schedule A. Tax forms and publications are available on the IRS website at IRS.gov 
 

Webtax is a tax specialist and accounting company with 13 offices in and around the Charlotte area. Webtax is family owned and operated, providing the same great service today  as  they did when they opened their doors over 50 years ago. To learn more visit http://prep.1040.com/webtax or call 704-568-6421. 
 

 

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