Author Topic: Deduct total state sales tax on tax return?  (Read 3720 times)

Bearded Man

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Deduct total state sales tax on tax return?
« on: February 08, 2016, 09:14:59 AM »
From what I've read in blogs of several CPA's, you can use credit card statements to calculate sales tax paid. Since my credit card categorizes my expenses by merchandise, health care, utilities, etc. I am considering doing it, however; should I just use my general sales tax rate of 6.5% or use the county tax rate that is closer to 10%? Or is it not worth doing at all? Seems to have bumped my return by about $400 with just a rough estimate using state sales tax.

I'm a red panda

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Re: Deduct total state sales tax on tax return?
« Reply #1 on: February 08, 2016, 09:28:51 AM »
Do you pay your estimated sales/use tax for all items purchased online or out of state where taxes weren't paid?  (Most people don't... although some states have a 'standard' amount you can claim if you don't know your actual, which does make it easier.)

If you aren't doing that-  I wouldn't do this either. I've been told that people can get away with almost anything lately because there aren't enough employees to be doing many audits anymore, but this seems like a fairly rare deduction to take, so it would worry me it will cause a flag.

Bearded Man

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Re: Deduct total state sales tax on tax return?
« Reply #2 on: February 08, 2016, 09:56:27 AM »
Do you pay your estimated sales/use tax for all items purchased online or out of state where taxes weren't paid?  (Most people don't... although some states have a 'standard' amount you can claim if you don't know your actual, which does make it easier.)

If you aren't doing that-  I wouldn't do this either. I've been told that people can get away with almost anything lately because there aren't enough employees to be doing many audits anymore, but this seems like a fairly rare deduction to take, so it would worry me it will cause a flag.

99.9% of it I pay state sales tax, as Amazon and most other companies I buy from online are based out of here or have an operation here.

I do recall reading an article where I believe this was a red flag for audit, since very few people do it, and the few who do it likely do it incorrectly. Too bad, I guess you'd almost be better off paying state income tax since it is easy to deduct, unlike itemizing hundreds if not thousands of receipts every year.

Goldielocks

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Re: Deduct total state sales tax on tax return?
« Reply #3 on: February 08, 2016, 10:33:22 AM »
Do you pay your estimated sales/use tax for all items purchased online or out of state where taxes weren't paid?  (Most people don't... although some states have a 'standard' amount you can claim if you don't know your actual, which does make it easier.)

If you aren't doing that-  I wouldn't do this either. I've been told that people can get away with almost anything lately because there aren't enough employees to be doing many audits anymore, but this seems like a fairly rare deduction to take, so it would worry me it will cause a flag.

99.9% of it I pay state sales tax, as Amazon and most other companies I buy from online are based out of here or have an operation here.

I do recall reading an article where I believe this was a red flag for audit, since very few people do it, and the few who do it likely do it incorrectly. Too bad, I guess you'd almost be better off paying state income tax since it is easy to deduct, unlike itemizing hundreds if not thousands of receipts every year.

If it is worth a lot of money to you, and you are 100% honest and not "tricky" with anything else that is a potential flag or problem for IRS discussion, then why not?

An IRS audit for sales taxes is not going to be that tricky of a thing.  You will get a couple of letters, be stressed about them for a couple of days, and then pay the amount they say is owing, unless you believe that they got it wrong.  In which case you write back (with or without payment) with an explanation, and wait for another letter.  There may be a penalty and arrears payment.  That is the extent of your risk. 

If you really think you have done the math right, and are complying with tax law, and the rest of your return is straight forward, I would claim it and see what happens.

If you are self employed, or claiming deductions "on the edge" of what is allowed, then it is not worth the hassle unless a great $ sum is involved, in which case you likely already have a tax accountant / attorney helping you..  :-)

And of course lastly,  if it is a great sum for sales taxes...  MMM has some great posts about enjoying the simple things in life, and building a quality experience of life that may interest you...   :-)

seattlecyclone

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Re: Deduct total state sales tax on tax return?
« Reply #4 on: February 08, 2016, 10:46:24 AM »
Have you looked at the number the IRS standard sales tax generator spits out? You're allowed to use this number in lieu of actual taxes paid if you desire. I have saved receipts for the past few years to calculate my actual sales tax paid, but the standard amount is always much higher for me. They assume much less Mustachian spending habits than I have.

soupcxan

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Re: Deduct total state sales tax on tax return?
« Reply #5 on: February 08, 2016, 10:50:51 AM »
Whoever says this is a "rare" deduction obviously doesn't live in Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming. If you are itemizing and you live in one of those states you are leaving money on the table not to claim this.

Regardless, the IRS has a calculator you can use. I don't see how they can challenge a number they provided themselves.

https://apps.irs.gov/app/stdc/stdc.html

JoJo

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Re: Deduct total state sales tax on tax return?
« Reply #6 on: February 08, 2016, 11:24:06 AM »
Have you looked at the number the IRS standard sales tax generator spits out? You're allowed to use this number in lieu of actual taxes paid if you desire. I have saved receipts for the past few years to calculate my actual sales tax paid, but the standard amount is always much higher for me. They assume much less Mustachian spending habits than I have.

I agree with this.  Unless you bought a car, I suspect most mustachians have spent less than their standard sales tax amount.  It's calced based on # of people in household & income.

Bearded Man

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Re: Deduct total state sales tax on tax return?
« Reply #7 on: February 08, 2016, 12:23:32 PM »
Have you looked at the number the IRS standard sales tax generator spits out? You're allowed to use this number in lieu of actual taxes paid if you desire. I have saved receipts for the past few years to calculate my actual sales tax paid, but the standard amount is always much higher for me. They assume much less Mustachian spending habits than I have.

The tax software mentioned it, but the table it had provided was clunky. This looks great, thanks! Got $1,593 out of it for sales tax paid. I'll take it!
« Last Edit: February 08, 2016, 12:25:19 PM by Bearded Man »

I'm a red panda

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Re: Deduct total state sales tax on tax return?
« Reply #8 on: February 08, 2016, 12:39:51 PM »
Whoever says this is a "rare" deduction obviously doesn't live in Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming. If you are itemizing and you live in one of those states you are leaving money on the table not to claim this.


I think it is rare to use anything other than the standard amount.

v8rx7guy

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Re: Deduct total state sales tax on tax return?
« Reply #9 on: February 08, 2016, 12:42:21 PM »
Have you looked at the number the IRS standard sales tax generator spits out? You're allowed to use this number in lieu of actual taxes paid if you desire. I have saved receipts for the past few years to calculate my actual sales tax paid, but the standard amount is always much higher for me. They assume much less Mustachian spending habits than I have.

I agree with this.  Unless you bought a car, I suspect most mustachians have spent less than their standard sales tax amount.  It's calced based on # of people in household & income.

Thirded.  And in addition, you can take the estimated sales tax value and add any major purchases such as a vehicle or boat. 

SKL-HOU

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Re: Deduct total state sales tax on tax return?
« Reply #10 on: February 08, 2016, 03:49:26 PM »
Can you take this deduction if you do not itemize?

v8rx7guy

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Re: Deduct total state sales tax on tax return?
« Reply #11 on: February 08, 2016, 04:06:41 PM »
Can you take this deduction if you do not itemize?

No... you can only use it if you itemize.  It is on your schedule A, line 5b