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February 2015 Tip of the Month

Wish you could just dial 800-ABO-HELP?

Each year, when the tax season rolls around, we get a number of new clients who want us to prepare their tax returns.  Frequently, they had been preparing their tax returns themselves, but the returns became too complicated and they needed professional help.  Unfortunately, we find that that these taxpayers often made mistakes in the earlier years that led to the overpayment of taxes and the potential for being singled out for audit. 

Some of the more common problems we’ve seen are:

  • Not taking legitimate deductions, such as a deduction for a home office, for fear that it might trigger an audit 
  • Failing to deduct tax deductible expenses, especially travel, tolls, tips, taxi and other fares for lack of a receipt 
  • Losing the interest deduction by using credit card and other personal loans instead of home equity loans for purchase of a car or other big ticket item 
  • Reporting income that does not need to be reported such as tax-exempt income or rental income from a vacation home that's rented less than 14 days per year 
  • Paying IRS penalty notices out of fear, even if the assessments are incorrect 
  • Failing to take deductions such as for charitable contributions because the credit card charges have not been paid until the following year 

The combination of these mistakes plus a lack of proper tax planning caused these taxpayers to pay considerably more income taxes than necessary.  What's more, usually the extra tax far exceeded the cost of the professional tax preparation.  Without wishing to sound self-serving, unless you are highly conversant with the tax code, you'll usually come out way ahead with professional help from a CPA.

Does Abo and Company have all the answers?  Nope (although we have many). Still, when all we can do is raise the issue, unsure of all the ramifications, we, and many of our professional colleagues, embrace striving to help clients in finding the answers. 

We've had it on our website for a bit but we think you will find of interest our special newsletter report entitled "Your Tax Return...A Springboard for Tax and Financial Planning". Let us know what you think and, if you'd like a paper copy for you or a friend, you know you need only give us a call.

Tax Planning Newsletter