REI WEALTH MONTHLY Issue 31 - Page 29

TOP 5 MISTAKES THAT MAY BE COSTING YOU MONEY AMANDA HAN & MATTHEW MACFARLAND For example, a taxpayer named Jack made some bad investments back in 2014 which resulted in close to a $20,000 loss carryforward on his tax return. However, his over-worked CPA somehow “lost” that carryforward when he prepared Jack’s 2015 tax return. It was a mistake that could have cost James close to $8,000 of tax refunds over the next few years! A small yet potentially costly mistake. Mistake #5: Not Doing the Appropriate Analysis Filing tax returns should not be simply putting numbers on forms. Often times, it take analysis and scenario modeling to determine how to file the returns to provide you with the optimal results. Let’s take a look at how impactful an analysis can be. Sherri has two sons who are currently in college. After a review of her previous year’s tax returns, we noticed her prior tax preparer did not claim an education tax credit of $2,500 each for both her sons attending college because she was told that due to her high income level, she was not able to claim those credits. This is a correct statement (there is an income limitation for claiming the education tax credits), however, there is a loophole that was overlooked. With some analysis, we discovered an easy loophole: Sherri’s sons could have filed their own tax returns which in turn could have provided them $2,500 each in education tax credits! With a little strategy and analysis, Sherri and her sons were able to increase their overall tax refunds by $5,000 per year just by taking advantage of their education credits! As you can see, not all tax deductions are created equal and not all tax preparers are created equal.