We are in “crunch time” now when it comes to tax preparation – the IRS deadline of April 15 is only a few weeks away. And if you have been putting off the task, you are not alone! Unfortunately, waiting until the last minute can increase your stress level and force to rush to beat the deadline, which can lead to mistakes. For that reason, if you haven’t yet begun working on your taxes, we recommend that you get started now so that you don’t run out of time.

One area that can sometimes cause confusion (not to mention costly mistakes) involves claiming deductions. As you probably know, you have the option of claiming a “standard” deduction – or itemizing your deductions one by one. For many taxpayers, claiming the standard deduction results in a lower tax burden—but for others, itemizing is the better choice.

The IRS recently offered advice to taxpayers attempting to make this decision in a release posted on IRS.gov:

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.

Once you’ve identified the amount of itemized deductions you are eligible for and compared that number with your standard deduction, you’ll obviously want to select the higher number. It’s a fairly straightforward process in most cases, but if you find yourself racing to beat the deadline you may not have the time you need to perform these calculations. Don’t put yourself in that situation.

If you have questions about your specific situation or if you’d like help preparing your returns, or dealing with other IRS-related issues, please don’t hesitate to contact us today. We look forward to assisting you!