As the deadline to file federal and state income taxes approaches, taxpayers are faced with a number of questions:

Should you prepare your own taxes, or use a professional?

What are the benefits of filing online vs. physically through the mail?

Is it better to use standard deductions or itemized?

There are answers to these questions, though some may vary depending on each taxpayer’s individual situation.

The tax deadline was moved this year to midnight on April 18. Because Washington, D.C., will celebrate Emancipation Day on April 15, taxpayers were given an extra three days to file.

And while more taxpayers are filing by themselves and using electronic filing services like Intuit TurboTax than ever before, tax experts say many who prepare their own taxes may be paying more than they should by missing credits or deductions.

“Often times, filers may not know they qualify for something,” said Susan Renzo, enrolled agent with the IRS and a master tax adviser with HR Block in the Town of Poughkeepsie. “People tend to self-edit. They don’t take all the things they are entitled to into consideration when they do it themselves. By asking a few questions, I can pull it out of them.”

And the fastest way to get a refund, according to the Internal Revenue Service, is to e-file and choose direct deposit.

Taxpayers can prepare and e-file their federal tax returns online for free through Free File at IRS.gov. The site features a number of tips about selecting a preparer.

But, there’s much more to consider before April 18 arrives.

Filing yourself vs. with an expert

Smartphones are making e-filing easier and more convenient than ever. Forty percent of TurboTax customers used mobile devices in some way last year to file their taxes, nine times more than the year before, according to the online tax filing service. Using TurboTax’s app, customers can now take a picture of their W2s on their smartphones and upload the information to their online tax form.

But while filing your taxes on your smartphone can be convenient, some taxpayers who have more intricate variables on their return prefer to use a tax professional.

Poughkeepsie resident Warren Buhler, 71, says using an expert just makes the process easier.

“My stuff is a little complicated, so I file with a professional,” he said. “I have done that since way back when I had a corporation that involved five partners … I found it is much easier to have a professional go through it all.”

The IRS expects to issue more than nine out of 10 refunds within 21 days. By 2018, the IRSanticipates that 159,761,200 income tax return filers will file their taxes electronically, with an average annual increase of 2.5 percent between the years of 2011 and 2018. Meanwhile, paper filing will decrease from 93,776,300, with an average annual decrease of 1.3 percent between 2011 and 2018. These taxpayers will use a variety of software products to prepare and e-file their own returns, according to the IRS.

Itemize vs. standard deduction

While more income tax filers use standard deductions than itemized, there are benefits to itemizing, experts say.

The itemized deduction allows taxpayers to deduct very specific expenses, including medical expenses, home mortgage interest, real estate and personal property taxes and charitable contributions.

Tax return experts say filers should choose the tax form that allows them to pay the lower amount of tax. The form that results in the higher deduction amount often gives the most benefit. But, despite qualifying for it, the majority choose a standard deduction instead of itemized, Lisa Greene-Lewis, CPA and tax expert for TurboTax, said.

One reason might be that many people think they make too little to qualify for an itemized deduction, she said.

“The lowest a person can apply for an itemized deduction is $6,300 and $12,600 per joint return,” she said.

“Most people underestimate their expenses,” Greene-Lewis said. “They shortchange themselves. By keeping an accurate record and bringing those records in when they file, they are almost guaranteed a bigger refund.”

Hyde Park resident Donald Carson, 76, said he has been doing his taxes with the same professional for more than 30 years.

“The biggest advice I could give to anyone filing their taxes is to keep records,” Carson said. “If you keep good records, you can get through it very quickly. Many places, if you make donations to churches and so forth, they have to give you a (receipt) by law.”

Credits! Credits! Credits!

“While deductions reduce taxable income, tax credits reduce a taxpayer’s tax liability directly,” Tracey Niemotko, a CPA and chair of the School of Business and professor of accounting at Mount Saint Mary College, said.

Twelve percent of American workers with annual household incomes of less than $50,000 are aware of the Savers Credit, according to data collected by TurboTax.

Depending on your adjusted gross income and tax filing status, you can claim the credit for 50 percent, 20 percent or 10 percent of the first $2,000 you contribute during the year to a retirement account. Therefore, the maximum credit amounts that can be claimed are $1,000, $400 or $200. The biggest credit amount a married couple filing jointly can claim together is $2,000, Greene-Lewis said.

Meanwhile, only one out of every five people that are eligible claims their Earned Income Tax Credit, a uniform credit that varies each year, Greene-Lewis said.

Students may be eligible to benefit from either the American Opportunity Tax Credit or the Lifetime Learning Credit if they or their families meet the income requirements and have qualified student expenses,” Niemotko said.

Affordable Care Act

The penalty for not having health insurance has tripled.

If you didn’t have health insurance in 2014, and didn’t qualify for an exception to the penalty, you may have paid $95 per person or 1 percent of your household income, whichever is greater.

This year when you file your taxes, you can pay $325 per person, or 2 percent of your household income, whichever is greater. That can really add up for a middle-class family of four.

But, there are some exemptions from the requirement that taxpayers may not know about, experts say.

“There are over 30 exemptions,” Renzo said. “One of the most common ones is income level. If you make $10,300 or less and file single and $20,600 and file joint, you are exempt from the penalty.”

Refunds on past taxes

Another benefit of using a tax professional is services like “Second Look” from HR Block.

From now until the deadline, people can bring in their returns from the past four years (until 2012) to HR Block so tax professionals can find any additional refunds that previously went unclaimed.

“Sometimes it’s a very substantial amount of money,” Renzo said.

Declining to file

If you don’t file your taxes you could face penalties. But, experts say, more often non-filers miss out on some substantial refunds.

The IRS averages that 75 percent of income tax filers receive a refund, and the average refund is about $2,800. Nearly one million tax returns go unfiled and the average unclaimed refund is $700.

“Some people think that they dodged a bullet with the (IRS) if they do not file,” Renzo said. “But, I run into more people that would have gotten refunds from the IRS.”

Amanda J. Purcell: apurcell@poughkeepsiejournal.com; 845-437-4807; Twitter: @amandajpurcell

Free tax help Wednesday

The Poughkeepsie Journal will host its annual Tax Counsel Clinic 5-7 p.m. Wednesday, March 23. Experts from the New York State Society of Certified Public Accountants will be available to answer your looming tax filing questions, help you define undiscovered deductions, teach you the basics of common tax credits and educate you on all you need to know about the Affordable Care Act’s tax implications and more.

Save this number and call 845-451-4541 to talk to a tax expert on the phone. For more information, see page 8C.

Tax needs vary by generation

Depending on what phase of life a taxpayer is in, their needs and questions when preparing income taxes may vary. Here are tips for each generation:

Millennials

If you had a friend or significant other stay with you in 2015, you may qualify for a deduction in income taxes, Lisa Greene-Lewis, CPA and tax expert for TurboTax, said.

“If that significant other or friend stayed with you the entire year, you would be able to claim a deduction for them if they made less than $4,000 in income,” she said. “It’s pretty common and a lot of people don’t realize that.”

Recent college graduates should also check with their parents to make sure they are not listed as dependents on their parents’ tax forms, Greene-Lewis said.  

“Students that work but make under the IRS filing threshold of $10,300 may not think to file their taxes,” Greene-Lewis said. “But if they have federal taxes taken out, and are eligible for credits, like earned income tax credit or education credit, they could still get a refund. Of the nearly one million unclaimed refunds each year, a big portion of them are people think they don’t make enough money to file their taxes.”

If you searched or moved for a job in 2015, you may be able to deduct those expenses.

Gen-Xers

There’s an extra $350 awaiting you if you have a child under age 17 and are income eligible in New York State. It’s the second year of a three-year program that provides a $350 rebate to New Yorkers with children, called the “Family Tax Relief Credit.” In 2014, the rebates were sent out as checks in the mail. This year and in 2017, the money is a credit when people file their 2015 income taxes.

Any money you contribute results in a tax deduction for the current year, which reduces your taxable income. For 2015, the 401(k) max is $18,000 for 2015, up $1,500 from 2014. The IRA contribution limit remains at $5,500 for 2015.

Baby Boomers

For boomers, filing their adult child’s status on their income tax return might be a bit tricky.

“Many people I talk to are surprised to find that they no longer qualify for a child tax credit when their child turns 17,” Renzo said. “But you may be able to claim that child as a dependent if they lived with you for the year.”

If you have appreciated investments in a taxable account, you can get a double tax break by donating the asset directly to a qualified charity.

If a taxpayer takes out money from their retirement account early, they could be taxed on the withdrawal amount and incur an additional 10 percent tax on the amount they took out.

The standard deduction amount is higher for those who are age 65 or older.

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