Tips for Tax Deduction and Credit Planning

Tax season is in full swing — and the federal filing deadline is fewer than two months away on Tuesday, April 18. As you prepare to file your taxes, we want to help you make the most of your available credits and deductions. After all, every dollar you do not spend on taxes is one you can potentially invest toward your financial future. So, we’ve compiled tips for tax deduction and credit planning, with information on who is eligible and how you could possibly benefit.

Understanding Available Credits

Each tax credit you qualify for will directly reduce your tax payments. The IRS offers two kinds of credits: refundable and nonrefundable. With refundable credits, you can receive a refund, even if you owe less than the credit amount. On the other hand, nonrefundable credits offer a refund amount up to your tax liability.

Knowing which tax credits you qualify for can significantly reduce the amount of taxes you owe — and possibly even result in a refund. The IRS has a number of credits for individual taxpayers, but here is a list of common ones you could qualify for:

  • Earned-Income Tax Credit: For households with low- to moderate-income.
    The income limits can fluctuate, and many more people qualify for this credit than may realize it. In fact, 25% of eligible taxpayers do not claim this credit — which can be over $6,000 per household.
  •  Child and Dependent Care Credit: For households who pay for childcare.
    If you have dependent children and pay for childcare, you may qualify for credits up to $6,000, depending on your adjusted gross income (AGI).
  • Credit for the Elderly or Disabled: For taxpayers 65 and older, or those on permanent disability who meet income requirements.
    This credit starts at $3,750 and goes as high as $7,500. So, if you fit the age or disability restrictions, researching your eligibility is well worth the effort.
  •  Lifetime Learning Credit: For households paying for education.
    This credit can provide you up to $2,000 toward qualified tuition and enrollment fees. To be eligible, you must have a modified AGI less than $130,000 as a married couple or $65,000 as an individual.
  • Premium Tax Credit: For households that purchased health insurance through a federal or state marketplace.
    This credit helps people cover the cost of premiums for insurance they purchase through the Health Insurance Marketplace. Depending on your income and other personal details, you may be able to receive a premium tax credit if you, your spouse, or your dependent purchased an eligible health insurance plan.

 Planning Your Deductions

Deductions help reduce your taxable income, thereby hopefully lowering your tax liabilities. Between itemized and standard deductions, taxpayers claimed nearly $2 trillion in the most recently tracked year. That’s a lot of money! But, chances are, many people miss eligible deductions and still pay more in taxes than they need to.

Remember, when you use the standard deduction, you can likely claim a higher deduction if you or your spouse has a qualifying vision impairment or a birthday on January 2, 1952, or earlier.

If you itemize your deductions, you are likely familiar with the opportunities to write off your home mortgage interest, tuition fees, and charitable contributions. But here are a more few deductions you may be eligible to take, depending on your circumstances:

  • State Sales Tax: Mostly for households who don’t pay state or local income tax.
    If you only pay federal income taxes, you may be able to deduct your state sales tax on your federal return. This deduction is especially helpful if you made a large, taxable purchase in 2016, such as a car.
  • Business Travel Expenses: For taxpayers who have unreimbursed work travel.
    If you paid for travel to conferences, meetings, or other work obligations, you may be able to deduct your expenses. The list of potentially deductible items goes beyond transportation and lodging to include dry cleaning, meals, business calls, and more.
  • Student Loan Interest: For households paying student loan debt.
    If you currently pay student loan debt, you may be able to deduct interest, depending on your income and specific circumstances. Deductions can be up to $2,500 for student loan interest — and you are allowed to claim this deduction even if you don’t itemize deductions on your tax return.
  • Sale of Your Home: For households who profited from selling their main home in 2016.
    If you sold your primary residence last year and earned a profit, you may qualify to claim this exclusion. If you qualify, you can exclude up to $250,000 of the gain from your income – or up to $500,000 if you file taxes jointly with your spouse.

Because the opportunities to reduce your tax liabilities are vast, and these credits and deductions are only the beginning, it is best to consult with your tax preparer or a qualified tax professional. Various factors in your unique financial life will guide what options are available to you. If you have questions or would like to learn more about how you can make the most of your 2016 federal taxes, we are happy to talk. Send us an email, or give us a call at (419) 425-2400. We can also connect you with qualified tax professionals, should you seek further support.

6 Tax Filing Errors to Avoid

The dawn of 2017 brings opportunities to create new resolutions or plans for the next 12 months — and also marks the beginning of tax season. While tax day on April 18th can seem far off, this year’s deadline will be here before you know it.

As you start the process of gathering your tax documents and completing your return, we want to provide a reminder of common filing errors to look out for. Whether you hire a professional or go it alone, avoiding these mistakes can help ensure your taxes are correct and prevent unnecessary delay or feedback from the IRS.

Tax Filing Errors to Avoid

 1. Having incorrect or missing Social Security Numbers

The IRS processes millions of tax returns each year, and they need correct identifying information in order to address yours correctly. Transposing numbers when writing your Social Security Number (SSN) or accidentally recording your spouse’s or children’s SSN incorrectly is easy when you’re writing or typing quickly. Before you submit your taxes, check each SSN against the Social Security card to make sure the numbers are accurate.

2. Choosing the wrong filing status

Your filing status determines many aspects of your tax responsibilities — from your standard deduction to applicable credits. So, ensuring you select the right option is crucial. Because you may be eligible for more than one filing status, this year’s best choice could be different than in the past. To explore which filing status is right, visit and complete a five-minute survey to determine which choice fits your circumstances and will result in the lowest tax liabilities.

3. Not addressing life changes

Life is full of transitions, and many of them affect your tax liabilities. When you begin to work on your taxes or meet with your tax preparer, identify any changes that impact your financial life. Marriage, divorce, and house buying are common life events to address, but the list extends much further:

  • Do you have a child who started daycare?
  • Did a parent move in with you?
  • Did you turn a spare room into a home office?

Take an inventory of your life in 2016 and look for changes that could matter to your taxes.

4. Missing or miscalculating charitable donations

Contributing to nonprofits is a powerful way to promote your values — and lower your tax bill. So, make sure you receive the greatest benefit by capturing all of your charitable donations in 2016. Gather your records for all donations to qualified, tax-exempt organizations, including:

  • Cash
  • Tax-deductible event tickets
  • Clothing
  • Household goods
  • And more


When calculating your donations, use the fair-market value (what someone would pay for the item now) not your original purchase price.

5. Making typos

Tax returns are long and filled with data — especially if you have other forms or worksheets to complete along with your standard Form 1040. Each entry creates an opportunity to make a mistake. Before filing your return, comb through your answers and cross-reference to make sure you or your tax preparer has:

  • Spelled each name correctly
  • Input the right numbers from each form
  • Listed your bank account numbers correctly if you’re using direct deposit

6. Filing by mail

Completing hard copies of your tax documents and sending them by mail is still a valid option, but the IRS recommends you file electronically. The e-file system will often find common errors in your return and reject it for you to correct them — so you can fix any mistakes now rather than experiencing potential filing delays with a paper return.

Few people enjoy doing their taxes, but if you take the time to slow down and avoid these filing errors, you can help simplify your experience and keep Uncle Sam off your back.

If you have any questions about your financial life or would like advice on finding the right tax professional, give us a call at (419) 425-2400, or send us email. We are here to help!

10 Ways to Avoid Common Tax Filing Errors

Image courtesy of Miles

Image courtesy of Miles

Tax time is here and we’re getting close to the April 15th filing deadline. Tax laws changed significantly in 2013 and taxpayers are now responsible for several new taxes as well as changes to deduction limits and exemption phaseouts.1

Last year, the IRS published a list of common tax filing errors2 that we wanted to pass along with our tips for avoiding them. You can prevent the vast majority of these mistakes with a little extra attention or the help of a professional tax advisor.

It’s in your benefit to catch errors before filing because a simple oversight could delay or cost you a refund, if you’re entitled to one. A blunder that causes you to underpay your taxes could lead to stern letters and penalties from the IRS or, worse, trigger an audit.

Here’s how you can avoid making one of these common errors:

1.         File electronically. By filing electronically, you can use computer software to catch many common mistakes. E-filing can also reduce the chances that an error in processing is made by the IRS.3

2.         Review your deductions. The IRS says many mistakes happen when taxpayers are calculating their deductions. For example, remember that if you are age 65 or older, you qualify for a larger standard deduction.4 Under time pressure, many taxpayers take the standard deduction instead of itemizing, potentially increasing the size of their tax bill. A tax professional can help you determine the best way to treat deductions.

3.         Check your charitable contributions. Missteps involving charitable deductions are quite common; it’s important to understand what the IRS allows you to deduct and how you must document it. You can consult a tax advisor or review IRS Publication 526 for more information.5 Don’t forget to claim any charitable contributions you made through payroll deductions or as qualified charitable distributions from your IRA.

4.         Share important information with your tax preparer. Working with a tax specialist can help cut down on expensive errors, but they aren’t mind readers. Don’t make the mistake of failing to share vital information with your tax preparer.

5.         Choose the right number of dependents. While this should be a simple decision, it becomes complicated during life’s transitions. For example, if your child recently got a full-time job or you are newly responsible for an elder’s care, you may want to review whether you can claim them as dependents or not.

6.         Correct the spelling of names and social security numbers. Make sure that all names and Social Security numbers match what’s on your (and your spouse’s) Social Security cards. If you’ve changed your name since the last time you filed your taxes, you’ll need to notify the Social Security Administration (SSA) so they can update their information. You can do this by filing form SS-5 at your local SSA office or by mail.6

7.         Double-check your direct deposit information. Most taxpayers give the IRS bank account information to receive their refund by direct deposit. Unfortunately, if you’ve given the IRS the wrong account information, your refund could easily go astray.

8.         Sign the return and attach all documents. The IRS won’t accept unsigned tax returns, so it’s critical that you (and your spouse if you file jointly) sign your 2013 tax return and include all necessary schedules and documents. Don’t forget to include a check for any taxes owed.

9.         Report any additional income. If you picked up a side job this year or are receiving income from your investments, be sure to report it to the IRS. If you forget to include this information on your return, there’s a good chance that you could owe additional taxes and penalties on your unreported earnings.

10.       Consult a professional. Tax laws are complex and consumer-grade tax preparation software is designed to meet the needs of the average taxpayer. If you have a complicated tax situation, a tax specialist can help you prevent mistakes and identify potential tax savings.

If you have any questions about the information we’ve presented or are concerned about your taxes, please contact us…we’d be delighted to help.