Transcripts

"Kevin McCormally's Tax Tips"-Hidden Deductions

SUSIE GHARIB: In tonight's tax tips, our tax guru, Kevin McCormally, editorial director of "Kiplinger's Personal Finance," looks at hidden deductions.

KEVIN MCCORMALLY, EDITORIAL DIR., "KIPLINGER'S PERSONAL FINANCE": You may have heard that the IRS says that millions of taxpayers are failing to take advantage of a new break that has its very own line on the tax forms this year, the refund of telephone excise taxes that the government collected illegally. That makes me wonder how many folks are accidentally missing much bigger tax breaks that don't show up on the forms at all.

I'm talking about the so-called extenders. Three expired deductions that Congress resurrected after the IRS sent this year's forms to the printer. The law makers' procrastination threatens to cost taxpayers millions of dollars. It slowed down refunds because the IRS scrambling to reprogram its computers for the last minute changes, was unable in January to process returns that included any of the hidden deductions. But the computers are running now and it is important for to you know that the deductions for teachers and their aides, for college tuition and for state sales taxes paid are allowed for 2006 just as they were in 2005.

The trick is to know where to put them on the forms. In each case the IRS is making lines designated for other purposes do double duty. The deduction for college tuition for example goes on the line that's labeled as the home for the domestic production deduction. Check out the IRS web site at www.irs.gov to see if you are eligible for any of these breaks and if you are, how to claim them. If you use tax software, be sure to download the updates that have all these changes built in. That will protect you from a costly mistake. I'm Kevin McCormally.