Taxpers in Denver, Dont Tip The IRS

Perhaps you are a rare breed of taxpayer
who believes that the Internal Revenue Service does not collect enough taxes and
that they are entitled to more of your earnings than they “request”.  If that is true, then you probably don’t
mind being one of the two million or so people that pay too much in taxes every
year by taking the standard deduction. 
The IRS certainly doesn’t mind receiving the nearly $1 billion “tip” the
General Accounting Office estimates resulted from taxpayers not itemizing on
just one year’s returns.

The standard deduction amount is
established annually and is intended for people who don’t have many

expenses.  They are listed on tax-return forms and
will vary according to your filing status.

Itemized
deductions are
calculated from allowable expenses that a taxpayer tracks through the tax
year.   These often include
job-related expenses, charitable contributions, property taxes, home mortgage
interest and medical expenses.  They
are reported on Schedule A, with some amounts limited by a filer’s income.  Although it takes more work, itemizing
taxpayers often find the effort pays for itself through a lower tax bill.

So
why are itemizing
filers

consistently in the minority?  It is not an altruistic desire to

contribute more to the governmental
coffers, but rather a

combination of confusion,

insecurity, and simplicity.  The majority of those paying

unnecessary taxes were from
lower-income households, the very group that can least absorb these financial
missteps.  Middle-income filers were
a close

second.  Although the GAO doesn’t try to
determine why people would claim the standard deduction when itemizing would
save them money, many of their critics blame the increasingly complex tax
code.  Many rank-and-file taxpayers
are so

overwhelmed by all of the rules,

limits, exceptions and constant
changes that they lose faith in their ability to prepare an

accurate return.  By using the standard deduction, they
elect to forego savings for simplicity and to end their tax involvement more
quickly.

The good news in all of this is that it
is not too late for taxpayers who cheated themselves by taking the standard
deduction to recoup lost tax money. 
If you discover that you could have saved by

itemizing deductions and are

willing to tackle your taxes again,
you may file an amended return on Form 1040X.  This will let you negate your original
standard deduction and list all the money-saving deductions you should have
taken.  You must amend tax

returns within three years of the
original filing deadline, so you could go back and amend your 2003, 2004 and
2005 returns to get your rightful money back.  Although this may sound like a daunting
task, look at it as a

training session—for which you will
likely by paid in the form of a lowered tax liability—that will prepare you for
a smoother tax season in 2007.

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