Ask Tax Dad: I Just Can’t Quit Itemizing My Deductions

TAXDADSEZHistorically, our staff Certified Tax Cat has handled readers’ questions about taxes, but he took feline early retirement and hung up his oversized eyeglasses. Filling in for him is Laura’s dad, a retired accountant and real live independent tax preparer. Exclusively on Consumerist, Tax Dad answers your questions.

Bezel writes:

I have been itemizing my [deductions] for the past 15 years. I have had no changes to my tax situation, other than a small decrease to investment income/interest. This year my prep software informed me that the standard deduction is more favorable than itemizing. Is this possible? Is there any negative impact on my 2014 taxes by not itemizing? Thank you.

I believe I can answer this, Bezel. You should file your return using your itemized deductions or the IRS’ standard deduction, whichever gives you the lowest taxable income. Your tax prep software should aid you in this, unless you checked a box saying that you wish to itemize even if your taxable income would be lower.

For those not familiar with “Standard” and “Itemized” deductions, the IRS allows all taxpayers to lower their taxable income by subtracting certain expenses. These are called deductions. A complete list would be longer than most Consumerist posts, but the most common ones include state and local taxes or sales taxes paid, mortgage interest, student loan interest, property taxes, charitable or religious contributions, gambling losses (if you have large enough gambling winnings that you have to include them on your tax return), and some other deductions.

If a taxpayer doesn’t have a substantial amount of these deductions or just doesn’t want to bother, he or she is allowed a Standard Deduction instead. Here’s an interactive guide that will help you calculate your standard deduction. In most cases, the higher your deduction, the less your taxable income, and the less tax you pay. Of course, the taxpayer must keep records of all these payments in order to itemize them on Schedule A.

Clark asks:

My wife and I left Lansing, MI and moved to MA in 2012. However, she had $4.74 in Lansing local income tax withheld in 2013 from a job in a different city. Do we need to file a Lansing return?

You would need to file a city of Lansing return if you want to obtain a possible refund of the $4.74. Otherwise, the City will probably not come looking for a tax return from you.

Kate asks:

Hi Tax Dad! I filed my federal return and then realized that I’d completely forgotten to include information about taking withdrawals from a Roth IRA (I’m 30 and the IRA only had $200 in it anyway), plus the interest from my regular savings account (said interest was under $10). I know I’ll have to file an amended return but will I also need to do one for the state return as well?

Hi Kate: yes, you should do a calculation of your taxable income after the changes, and file an amended return if you owe more tax. (Or less tax, but that wouldn’t be the case here.) Remember that your contribution to, or basis in, the Roth IRA is usually not taxable, but earnings are.

If you do file a 1040-X Amended Return, you should also file an amended return for your state, even if your state tax owed did not change.

Rebecca writes:

I got married in November, and my husband is here on a student visa. We have submitted all of his paperwork to United States Citizenship and Immigration Services for his permanent resident application, but it will take about 6 months. In the meantime, I can’t file my taxes until I file more paperwork to get him an ITIN (?). Is then something I can do myself, or is it very likely that I’ll botch it and I should really go to a professional?

Hi Rebecca: I must admit to no experience with non-resident taxes, but in consulting with IRS and some colleagues, here is my advice. I am assuming you have filed either SS-5 for a SSN or W-7 for a ITIN, and hopefully neither one will take more than 6 months for approval.

I would suggest filing with the IRS for a 6-month extension, Form 4868, on your tax return. You would need to do a quick calculation of your tax return and pay the approximate amount of taxes you might owe. If your husband’s paperwork is completed any time within the 6 months, which would be to October 15, you would be able to file your return. In most cases, filing jointly with your spouse would be the best way to go.

Disclaimer: The nature of free advice is that you often pretty much get what you pay for. Questions answered in the “Ask Tax Dad” column should not serve as a substitute for consulting a tax preparer, accountant, tax attorney, or certified tax cat of your very own. Tax Dad regrets that he cannot offer advice privately over e-mail.