Filling out your tax returns is enough to give anyone a massive headache. Even worse, you don't want to lose thousands of dollars by missing an easy deduction. Help Me Hank checked with an expert at H&R Block about the most commonly missed deduction, new health insurance penalties, and how to avoid an audit.
Jennifer Owens is a Master Tax Advisor at H&R Block. She says she sees people losing thousands of dollars each year because they don't claim the Earned Income Tax Credit. There is a formula to determine if you're eligible based on your income and size of your family. Basically, if you make less than $55,000, you might qualify, and you could save up to $6,000 on your tax bill.
Health Coverage Penalties
This year, there is yet another change involving the Affordable Care Act and coverage penalties are on the rise.
If you bought insurance through the government marketplace this year, you will receive a form 1095A. You will need to fill out that form and file with your tax return this year. If you have insurance through your employer or the government (Medicaid, Medicare) you should receive a form 1095B or 1095C. Some of you may not receive the form before you file, you don't need to include the form with your return, at least not this year.
Hopefully, you know the Affordable Care Act requires everyone to prove they have some sort of health insurance coverage. The penalties have increased and will increase again.
"A family of four earning about $60,000 during the year would face a penalty of about $975 this year, and it's going up to $2000 next year," Owens said.
Avoiding An Audit
There's no magic formula to avoiding an audit, but there are some common sense steps that could help you fly under the radar at the IRS.
First, be extremely careful with all your information. Mistakes of any kind can trigger IRS agents to take another look at your return.
1. Be precise with personal information
2. Avoid mathematical mistakes
3. Be sure to report ALL taxable income
4. Make sure none of your deductions see too large or they will get a second look
5. Save all tax returns, receipts, and documentation for at least seven years, in case your returns are ever questioned
There is one ray of light. If you are audited, Owens says most audits are not very dramatic and can often be handled through correspondence with the IRS.
"If you ever receive an IRS notice in the mail, I would suggest you don't panic, contact your tax professional or contact a good organization that can help you move through that audit," she said.
Tax Help 4 Year: Experts Answer Your Calls
On Tuesday, March 22, Help Me Hank presents Tax Help 4 You on Local 4 News Today from 5 a.m. to 7 a.m.
Special section: Taxes 2016