No one enjoys paying Uncle Sam, but it’s possible you’re shelling out more in taxes than you should—to the tune of four Benjamin Franklins.
An H&R Block study from 2014 found that one in five Americans who do their own taxes on average left $400 on the table by not claiming all the credits and deductions they could take. Overall, these mistakes added up to more than $1 billion in unclaimed cash from U.S. taxpayers.
Check out the eight common tax mistakes Americans are making, so you can avoid them this year.
1. Not itemizing.
“It’s a mistake that people, especially with good incomes, make,” says Jackie Perlman, senior tax research analyst with the Tax Institute at H&R Block. “People don’t itemize because they don’t own a home, but there are other itemized deductions they can take advantage of.” You just have to do the math and see if your deductions are greater than the standard deduction, which depends on your filing status (single, married, head of household, etc.).
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For example, taxpayers can deduct state income taxes from their federal returns. That could mean major savings for people who live in states like New York or California with high income-tax rates. Local income taxes can also be deducted. Also, if you had substantial medical expenses or student loan interest, the amount could be enough to lower your taxable income versus only taking the standard deduction. The tuition and fees deduction by itself can reduce taxable income by up to $4,000.
2. Not being prepared.
A lot of mistakes can be avoided by simply organizing your tax information, says Perlman. She recommends that you pull out last year’s return to see what forms you should expect, such how many banks sent 1099 forms the year before recording interest you earned. Keep any records for deductible expenses or donations in one place, so you don’t have to hunt around, especially if you’re a last-minute filer.
3. Not taking education credits.
Only two-thirds of 18 million people in college claimed one of the higher education tax breaks, according to the 2014 H&R Block study. Two of the breaks are credits, which are more valuable than deductions because credits reduce your actual tax bill.
The American Opportunity Credit is worth up to $2500 and applies to those who are enrolled at least half-time in the first four years of college or who have kids that are. The second credit is the Lifetime Learning Credit worth up to $2000 and applies to any higher education, even just one course.
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4. Not claiming EITC.
One in five households that are eligible for the Earned Income Tax Credit don’t claim it on their tax returns, a large enough number that the IRS has created an EITC Awareness Day each year for this specific credit. This EITC credit is worth up to $6,242 for taxpayers with three or more qualifying children and earned income up to $53,267. The credit is also refundable, which means that you receive the credit even if it’s more than the tax on your income, says Perlman. For example, if the tax on your income equals $2,000 and you have a refundable credit of $3,000, then you get a $2,000 credit toward your taxable income (reducing it to zero) plus $1,000 as a refund. That $1,000 would be lost if the credit was non-refundable.
5. Not documenting charitable donations.
“The mistake people make is not keeping track during the year,” says Perlman. “You make a $40 donation to the heart fund, you forget all about it and now it’s a year later. You don’t remember how you did it or if you did it.”
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Perlman recommends keeping a running record of everything you donate in one place and knowing the IRS rules regarding charitable contributions. Donations under $250 require a canceled check, bank record or receipt from the charity as documentation. Donations valued $250 or more require written acknowledgement from charity that requires a host of specific details found on the IRS website.
6. Not double-checking entries.
“For DIY people, a tax software program will do the math for you and total everything up, but if you key something in incorrectly, your software doesn’t know that,” Perlman says. The consequences depend on the typos. If you enter a Social Security number incorrectly, the tax return will be rejected and you will have to correct and refile it, without amending the tax return. But if other entries are wrong—such as filing status, credits, deductions or income—you will need to amend your tax return, which is just as fun as filing your original return.
7. Not choosing the right filing status.
Choosing the accurate filing status affects the value of some credits and deductions. In some instances, many married couples—including those who are separated but not yet divorced—would be eligible for more tax breaks and possibly a larger tax refund if they choose the “married filing jointly” status versus “married filing separate.”
Similarly, some individuals who file as “single” may actually qualify as “head of household” status, which offers substantial financial benefits, including a larger standard deduction.
8. Not amending older tax returns.
Taxpayers often think they only need to amend an earlier return if they owe the IRS more money or if there is an error on the return. But you can also amend a return if you realize that you can get a bigger refund by changing your filing status or adding a credit or deduction you left off. The IRS recommends getting your original tax refund first before sending in your amended return. You can amend returns for up to three years from the filing date.