The Difference Between Standard and Itemized Deductions

Taxpayers have two options when completing a tax return: take the standard deduction or itemize their deductions. Taxpayers should use the option that gives them the lowest overall tax.

The standard deduction amount increases slightly every year and varies by filing status. The standard deduction amount depends on the taxpayer's filing status, whether they are 65 or older or blind, and whether another taxpayer can claim them as a dependent. A married individual filing as married filing separately cannot take the standard deduction if the other spouse itemizes deductions - if one spouse itemizes on a separate return, both must itemize.

Itemized deductions that taxpayers may claim include: state and local income or sales taxes, real estate and personal property taxes, home mortgage interest, mortgage insurance premiums on a home mortgage, personal casualty and theft losses from a federally declared disaster, gifts to a qualified charity, and unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income.

Holiday Scam Reminder: Gift Cards Are Never Used To Make Tax Payments

This holiday season the IRS reminds taxpayers that the IRS does not ask for (or accept) gift cards as payment for a tax bill. However, that doesn’t stop scammers from targeting taxpayers by asking them to pay a fake tax bill with gift cards.

Here's how this scam usually happens: A scammer posing as an IRS agent will call the taxpayer (or leave a voicemail with a callback number) telling them that they must pay a fake tax bill or a fictitious tax penalty. The scammer will then instruct the taxpayer to buy gift cards from various stores. Once the taxpayer buys the gift cards, the scammer will ask the taxpayer to provide the gift card number and PIN numbers.

The IRS will never call to demand immediate payment, nor will the IRS demand the taxpayer use a specific payment method such as a gift card. Gift cards make great presents for loved ones, but they cannot be used to pay taxes.

All Taxpayers Have the Right to Appeal an IRS Decision in an Independent Forum

Office of Appeals: The IRS Independent Office of Appeals is an independent organization within the Internal Revenue Service that helps taxpayers resolve their tax disputes through an informal, administrative process. Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties. Taxpayers also have the right to receive a written response regarding a decision from the IRS Office of Appeals.

Tax Court: Taxpayers who receive a statutory notice of deficiency (which is an IRS letter proposing additional tax) and who then timely file a petition with the United States Tax Court may dispute the proposed adjustment before having to pay the tax.

Federal Court: Taxpayers who miss the Tax Court deadline or whose claim for a refund is denied by the IRS may file a refund suit in a United States district court or the United States Court of Federal Claims after fully paying the tax.