Tax season is here, and your 2014 tax return is due in about six weeks.
Local CPA David Young says the biggest change people need to be aware of this year is the requirement for proof of health insurance coverage due to the Affordable Care Act. If you did not have health insurance coverage in 2014, you could face a penalty amounting to one percent of your adjusted gross income.
Young says one common mistake he sees is taxpayers using the wrong filing status, which could be costly.
"A person will say 'Well, I'm single,' so they just mark 'single.' But, they fail to realize they may have a child living with them and you paid for the support of that child,” Young said. “Yes, you may be single for dating purposes, but for tax purposes, you are head of household, which would be a favorable tax status for you."
As for which tax returns are more likely to be flagged for an audit, Young says the IRS looks more closely at anything unusual, such as large charitable contributions or business expense deductions that are large relative to your income.
"You may have legitimately given X amount of dollars to your favorite charity, but the IRS may look at that return and say, 'Gee, this person is making $50,000 a year but they gave away $10,000. That seems high relative to that person's income.' "
"Many taxpayers just have a W-2 or they're getting 1099s and those numbers, the IRS can track,” Young said. “Also, when you pay your mortgage interest, that information from your lender is also being shared with the IRS. But if there are items that the IRS can't match up - for instance if you're self-employed or you have a rental property - those returns would have a little more scrutiny as to an audit."
The deadline for 2014 tax returns for both the IRS and New York State is April 15.