Liberty Tax Warns That Standard Deduction Can Cheat Taxpayers

For many, itemizing can lower tax liability, increase refund.

East Providence, RI (March 30, 2015) – Millions of Americans overpay their income tax each year because they make a quick and easy mistake – they choose the standard deduction. Itemized deductions take more time and effort, but they can pay off in the long run by returning to taxpayers more of the hard-earned money they deserve, according to Liberty Tax.

“Most of the errors on individual tax returns are errors of commission as opposed to omission,” said John T. Hewitt, CEO of Liberty Tax. “A little more time and energy devoted to the tax return can pay off for many taxpayers.”

The standard deduction does not allow taxpayers who pay mortgage interest and points or state and local income taxes or medical bills to calculate those deductions. Instead, the taxpayer opts to take a set amount. For the 2014 tax year, the standard deduction is $6,200 for single taxpayers, $9,100 for heads of household, and $12,400 or those married filing jointly.

When taxpayers itemize and include their deductions, they lower their tax liability and increase their tax refund – sometimes significantly. A Government Accountability Office report, “Taxpayers Who May Have Overpaid Federal Taxes by Not Itemizing,” estimated that almost 70 percent of all individual taxpayers took the standard deduction, and more than 2 million collectively overpaid the government by $945 million because they did not itemize although they were eligible for deductions. About 24 percent overpaid by $500 or more.

The report was published in 2002, but taxpayer patterns have not changed dramatically. In tax year 2012, nearly two-thirds of all individual taxpayers took the standard deduction.

“Our tax preparers are trained to find deductions and get customers the lowest tax liability or the biggest refund, “said Paul Pliakas, Owner of the Liberty Tax Service in East Providence. “We don’t want anyone to overpay their taxes.”

To find a local Liberty Tax office, call 866-871-1040 or visit www.libertytax.com. Liberty Tax does take appointments, but they are not necessary.