Jersey Residents’ Mistakes and Scams as Tax Day Approaches

Monday, April 15^th is Tax Day, we have until midnight that day to file our tax returns.

We will not be getting a refund this year. In fact, we’re paying a significant amount, but it’s not devastating. Experts say it’s best to set up your paycheck deductions, so you come as close to breaking even as possible.

My daughter lost a few bucks last year because her refund was less than it would cost to file a return. It was from a part-time summer job, and we learned that she should not have Federal taxes taken out of her paycheck. I didn’t even know you could do that.

Some prefer a refund on Tax Day, but your refund is like a year-long interest-free loan you’re giving to the government. It’s not a gift, it’s your money and you’re deciding to receive it later than you need to. Experts liken it to telling your employer to keep some of your paychecks and give it all to you at the end of the year.

The Internal Revenue Service recommends that you file electronically. Electronic filing minimizes mathematical errors and identifies potential tax credits or deductions that you qualify for. Many of us miss out on deductions each year because we simply are unaware of them.

You can have your federal refund deposited electronically into up to three accounts. If you choose this route, make sure you provide the correct banking information. Make sure your routing and account numbers for your direct deposit are accurate. This can lead to major delays and headaches.

It's also important to make sure we accurately provide the name, date of birth, and Social Security number for each dependent listed on our tax return. The Social Security number and name must be entered precisely as it appears on their Social Security card.

One of the most common mistakes is forgetting to sign your tax return. If you’re filing jointly both spouses need to sign and date the return. The IRS recommends you refer to "Validating Your Electronically Filed Tax Return" for help if you have any inquiries.

Then there’s the Tax Day scams. Reverse search company Social Catfish today released a report on the "Rise of Tax Season Scams" using FBI data.

There’s a TurboTax scam where scammers pretend to be from TurboTax and claim there’s an issue with your tax return. The easy way to avoid this is to go to the website directly rather than click on a link in an email.

Bad actors are pretending to be accountants or IRS agents in an attempt to get your personal and financial information. Sometimes you’ll receive a “Spoofing” phone call where the caller ID shows the IRS is calling you directly. They claim you need to pay money owed immediately to avoid jail time.

Then there’s the old “Unclaimed Refund” scam. All you need to know is that the IRS will never contact you by email, text message or social media.

If you believe you are the victim of an IRS online scam, please report it to the Treasury Inspector General Administration (TIGTA) and the Federal Trade Commission.

Tax season is truly in full swing. Tax deductions and credits are there to help people, so why not take the help? It might seem like a headache having to go through a long list of possible deductions, but it's really not so bad. I've gathered some information directly from the IRS to help you save this tax season. So, let's get into the dollars and cents.

Before we get into the savings, let's look at how credits and deductions work. According to the IRS, "You can claim credits and deductions when you file your tax return to lower your tax. Make sure you get all the credits and deductions you qualify for."

The definition of a credit, according to the IRS, is "an amount you subtract from the tax you owe. This can lower your tax payment or increase your refund." They note that some credits are refundable. That means "they can give you money back even if you don't owe any tax." If you want to claim credits, you must answer questions in your tax filing software. Or, if you're doing taxes the old-fashioned way, you'll have to fill out a form and attach it.

The definition of a deduction, according to the IRS, is "an amount you subtract from your income when you file so you don’t pay tax on it. By lowering your income, deductions lower your tax." In order to do this, you have to have documents to show expenses or losses you want to deduct. You can do this via tax software or, if you're filing a paper return, your deductions go on Form 1040 and you may need to attach extra forms.

Now, the fun part. Read on for tax deductions and credits that could save you cash this season. Here's hoping that Uncle Sam treats you well.

The standard deduction for 2023 is $13,850 for single or married filing separately; $27,700 for married couples filing jointly or qualifying surviving spouse; and $20,800 for head of household. "If you're married filing separately, you can't take the standard deduction if your spouse itemizes. You must both choose the same method," the IRS says.

To find the standard deduction if you're over 65 or blind, go here. To find the standard deduction if you're a dependent on someone else's tax return, go here.

According to the IRS, you can deduct these expenses whether you take the standard deduction or itemize:

Alimony payments
Business use of your car
Business use of your home
Money you put in an IRA
Money you put in health savings accounts
Penalties on early withdrawals from savings
Student loan interest
Teacher expenses
For some military, government, self-employed and people with disabilities: work-related education expenses
For military servicemembers: moving expenses

According to the IRS, you can deduct these expenses if you itemize:

Bad debts
Canceled debt on home
Capital losses
Donations to charity
Gains from sale of your home
Gambling losses
Home mortgage interest
Income, sales, real estate and personal property taxes
Losses from disasters and theft
Medical and dental expenses over 7.5% of your adjusted gross income
Miscellaneous itemized deductions
Opportunity zone investment

Tax season can be a confusing time. There are lots of bits and piece that you have to put together. That said, the IRS has a very helpful page with frequently asked questions. Find the list of questions and answers here. As always, it's also a good idea to get a professional to help with any questions.