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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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The recession was hard on me. In 2009 the banks foreclosed a few of my rental properties, than issuing me 1099C's to make the situation even worse. This made my tax liability enormous, as a result I didn't file taxes for a couple of years. I started receiving letters about my unpaid taxes from the government and my job. The accountant I hired in the past really didn't know much about 1099C,,s. That's when I searched the web and found Gary a life saver to say the least, he knew exactly what to do. If I would not have waited three years to file I would not have lost thousands for filing late. I wish I would have found him sooner, the fact that he does taxes in any state is a plus. I truly cant say enough positive things about my experience doing business with Gary. Thanks Again.

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Schedule A CPA discusses itemized deductions | Schedule A instructions

CPA Wilmington NC discusses Schedule A tax preparation

Gary Bode, CPA: we always prepare Schedule A during tax preparation. Why? So we can determine if itemizing reduces your tax liability. On the Schedule A instructions you’ll find issues you’ve never heard of. For a free initial phone consult, please call 399-2705.

A Good Schedule A CPA always calculates your itemized deductions on IRS Form 1040, just in case your itemized deductions are higher than the IRS standard deduction. Schedule A is a typical IRS tax form: six sections, each with their own instructions for tax reporting. Some line items flow into Schedule A from other forms. While it’s one of the most common tax forms, the Schedule A instructions show how complex itemizing can be.

If the total of the six sections is greater of Schedule A total more than the IRS standard deduction, the taxpayer may deduct the higher figure. If the total itemized deduction figure on Schedule A is lower than the IRS standard deduction, you would use the standard deduction.

Medical and Dental Expenses on Schedule A

“Medical and Dental Expenses” is the first section on Schedule A. The main requirement for deducting medical expenses? Only the amount over 7.5% of your Adjusted Gross Income, a subtotal at the bottom of page one on Form 1040, is allowed as a potential deduction. No deduction is possible if your medical expenses fall beneath this 7.5% threshold. Remember, medical expense is only one of six sections on Schedule A. Read the Schedule A instructions of course. Even if there is some allowable medical expense in this section of Schedule A, it’s the total of all six sections that counts!

This threshold means, generally, that only older folks get any tax advantage from their medical expenses. The IRS definition of medical expense is liberal, so almost anything medically related is deductible. There is an IRS list of prohibited medical expenses—most of which is logical. For example, you can’t claim medical expenses if you were reimbursed.

Follow the Schedule A instructions. Why is proper allocation on Schedule A important since it’s all deductible? The IRS breaks it into categories to help it deduct fraud.

“Medicare deductions form your social security benefits are deductible on Schedule E. Most tax software handles the transfer well but look at the Schedule A instructions to be sure.”
– Gary Bode Schedule A CPA tax accountant

Taxes you Paid section on Schedule A

“Taxes You Paid” is the second section on Schedule A. Currently, Schedule A allows the taxpayer to deduct state income taxes or sales tax. However, the general sales tax option might be eliminated in the future. Real estate taxes you paid is the other main allowable deduction here. A few years ago Congress added sales tax on new car purchases to this section. Again, reading the Schedule A instructions is prudent even if you use tax software.

Interest You Paid section of Schedule A

“Interest You Paid” is the third section. Mortgage interest is a good example of the IRS’s revenue matching program. The lender sends Form 1098 to both the IRS and the taxpayer. This eliminates taxpayer discretion on the amount reported, because it is cross-correlated! I would read the Schedule A instructions if the following scenario applies to you. If you paid mortgage interest to a person, not a bank, Schedule A has to list their name, Social Security number, and address; the IRS can then look for the same amount of income on that person’s Form 1040.

Gifts to Charity section of Schedule A

“Gifts to Charity” is next. The charitable contributions section of Schedule A gets special scrutiny during a tax audit. For cash contributions, you must have proof of any single contribution over $250. It is an area where we proactively address IRS audit issues by listing each charity and the amount. Why?—so there isn’t an aggregate figure for them to wonder about. Non-cash contributions (like used clothes to the local Goodwill) require an itemized receipt using, thrift-store values.

Here are links to other posts on Schedule A, Charitable Giving, and charitable Trusts. What don’t the Schedule A instructions cover? Art appraisals.

Casualty and Theft section of Schedule A

While this looks like a single line entry on Schedule A, the figure flows from IRS Form 4684. A Form 4684 CPA consult is prudent. Generally you can deduct both business and personal losses. Losses from Ponzi schemes, a stolen car, and home repair after hurricane damage are a few examples.

Job Expenses and Certain Miscellaneous Deductions section of Schedule A

Tax preparation fees, safe deposit boxes and employee expenses are examples. Again, the section looks simplistic, but employee expenses flow from IRS Form 2106. By the way, this section of Schedule A is, in my experience, the most audited tax document. Again, read the IRS instructions. Let’s use non-reimbursed business mileage as an example. The IRS expects to keep a contemporaneous mileage log, as opposed to making one up when they ask to see it. A recent tax court case denied the taxpayer any mileage allowance because he estimated the mileage. This ruling noted he did in fact have legitimate mileage, but because of estimated it he couldn’t take any deduction. Talk to your Schedule A CPA on this section of Schedule A. Strangely the IRS allows some estimates for other tax issues. I find the Schedule A instructions to be a hard read. I suggest you visit your local book store and read a tax book.

Other Miscellaneous Deductions section of Schedule A

Line 28 of Schedule A is limited to a list of items created by the IRS. Sometimes a supporting statement should be included. I think the Schedule A instructions or reading the miscellaneous deductions chapter in a tax book is prudent.

  • Gambling losses, but only to the extent of gambling winnings reported, unless you’re a professional gambler.
  • Casualty and theft losses of income-producing property from Form 4684 and/or Form 4797.
  • Some Schedule K-1 loss.
  • Federal estate tax on income in respect of a decedent.
  • Amortizable bond premiums.
  • Some unrecovered investment in a pension.
  • Impairment-related work expenses of a disabled person

CPA Philosophy on Schedule A

For a CPA accounting firm, Schedule A tax preparation is routine. Why? It’s hard to tell if our tax client is better off using itemized deductions, instead of the IRS standard deduction, unless Schedule A is actually prepared. So, our Schedule A CPA accounting firm always tries to use itemized deductions on IRS Schedule A, before accepting the standard deduction, just to be sure.

Rules of Thumb

Generally, paying mortgage interest makes Schedule A itemized deductions worthwhile for younger folks. Unfortunately, high medical expenses sometimes make Schedule A worthwhile for older folks.

If you’d like a free initial consult with a Schedule A accounting firm that prepares IRS and NC tax forms, including Schedule A, please consider calling us at (910) 399-2705. You will appreciate our proactive strategies.

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