We often encourage you to look forward while planning for your financial future, but sometimes it’s worth looking behind you, too. This is the case with old tax returns. With the ever-changing tax code, you might have missed past deductions. Read on to find out the specifics and to see if you might qualify for an additional refund.
Did you know that you have up to three years to amend an old return? That means you can reach back to the years 2015, 2016, and 2017 and review your paperwork for any missed opportunities. If you think something may have been overlooked then, you should be talking with your CPA soon to help you refile and claim any cash that was left on the table.
Frequently Missed or Forgotten
Let’s start with the most the recent year. In February 2018, the government retroactively extended more than 30 tax breaks that expired at the end of 2016. That change affected the entire tax year of 2017, so you may have filed your taxes before you realized that you could continue claiming certain credits and deductions.
Many of these tax breaks apply to businesses, but several might apply to your household, too. Did you make energy efficient home improvements? Did you qualify for the Tuition and Fee Deduction that could reduce your tax liability by $4,000? You’ll want to make sure that these didn’t fly under the radar. As a side note, the government may do the same thing for the upcoming tax season. It pays to keep a watchful eye. Your CPA can advise you if any retroactive changes take place at the beginning of next year.
On the education front, you’ll want to check into The American Opportunity Credit for College Expenses. This credit seems to be overlooked or misapplied. It’s worth $2,500 per student during the first four years of college. If the student was enrolled at least part-time and your AGI is less than $90,000 (single) or $180,000 (joint), you qualify for this credit. You should contact your CPA if you narrowly missed the income cut-off. There may be another missing deduction or credit that can help you meet the threshold.
You should also look into the Lifetime Learning Credit. It’s a tax break for graduate school and continuing education. This one is less likely to be applicable because of its lower income limits of $66,000 (single) and $132,000 (joint), but if you qualify, it could be worth up to $2,000 per year.
Are you still paying on those student loans? The student loan deduction allows up to $2,500 of student loan interest to be deducted each year if you fall within certain income limits.
Moving expenses for a new job might qualify for a refund, too. This deduction expired and cannot be applied for 2018 as of this writing, but it can be retroactively applied for the previous three years. If your new job required a move, you can deduct the cost of a moving company and even the miles put on your car during the moving process. There aren’t any income limits.
Other commonly missed tax breaks include benefits related to retirement saving and the child care and summer camp credit. Remember, you can amend tax returns for up to three years, so you will want to make these changes soon if they were forgotten in the past.
Did you receive additional tax-related documents after you filed your return? Let’s say you filed early last year, and then you received more information relating to your total reported income. Maybe it was a forgotten 1099 form or capital gains information. You will need to amend your taxes. You may not be getting money back, but you could avoid penalty fees.
Finally, you should be aware that amending a tax return is not without risk. If you correct one aspect of an old return, you’ll need to correct any other known mistakes. Of course, you should approach any tax return as if it will be under scrutiny by the IRS, but it’s worth noting that amended returns are more likely to be audited. Your CPA can help you weigh the pros and the cons before submitting any amendments.
If you think you might have missed something in an old tax return, now is the time to make changes. We are ready to work through any of the previous three years of paperwork with you and also help you prepare for this year’s tax season. Contact our team with questions.