DENVER - The deadline to file a federal tax return is April 18, and for any last minute tax filers, 9NEWS asked Kirby Johnson, a Certified Public Accountant at RubinBrown LLP, to sit down and provide answers to six common tax questions.
Johnson told 9NEWS he often gets questions about deductions. One of the most commonly asked is whether taxpayers can deduct the cost of clothing they bought to wear to work.
"The general answer to that is, no, you can't deduct that," Johnson said. "If you can wear it outside in public, generally, you're not going to be able to get a deduction for work clothes. That means the primary people that will get a deduction are people like firemen, or policemen, or a professional clown, or something like that, that has to buy specific clothes that aren't general-wear items."
However, he says taxpayers can potentially deduct the cost of job specific items such as a hair stylist's scissors or a mechanic's tools.
"Those are potentially deductable items because those are specific to the job and you're going to use those only for work," Johnson said. "So there's a lot of complexity beyond what actually ends up being deductible, but work related items are potentially deductible your tax return."
He says another area where taxpayers often get confused involves charitable donations.
"The big question with charitable giving is what's deductible and what can I include on my tax return? With any donation, you need to get a receipt whether it's a canceled check, a withdrawal notice from the bank, or a receipt from the charity," Johnson said. "For donations of stuff, when you go to ARC or Goodwill they are going to give you a receipt and it's up to you to document all of the items that you donated. Make a list. You can go to websites like the Salvation Army website and they have guidelines to show you how much to put as a deduction for those items."
He says another question being asked commonly right now regards unemployment, and he warns that many taxpayers who have been receiving unemployment compensation may be in for an unpleasant surprise when they do their returns.
"Unemployment compensation is taxable to the recipient." Johnson said. "A lot of people opt to not have withholding taken out of their unemployment compensation and it comes as a big surprise when they file their taxes. I always recommend that people go ahead and do withholding. I know it's going to make the budget tight, but it helps eliminate a big surprise come filing time if you already have some withholdings on your unemployment compensation."
So what should taxpayers do if they find themselves unexpectedly in debt to Uncle Sam?
"The IRS will allow you, in most situations, to enter into an installment agreement," Johnson said. "It's a voluntary form. You fill it out. I owe $3,000 and I say I'm going to pay $150 a month until that's paid off. But it has to be reasonable. You can't say I owe $10,000 and I'm going to pay $50 a month. That probably would get rejected."
And Johnson says you won't see a tax refund until all of your tax debt is paid off.
"Almost all the states and the IRS have reciprocal arrangements where if you owe the state of Colorado back taxes the state of Colorado could possibly place a lien on the refund that you might be getting from the IRS and vice versa," according to Johnson.
However, Johnson emphasizes these answers are general, and if a taxpayer has a question about their specific situation they should contact a tax professional.
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