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10 Common Tax Mistakes

        Money | Taxes

4
Missing a Tax Break
Mark Green with the IRS holds a guitar owned by singer Peabo Bryson in 2003. Much of Bryson's things were being auctioned off to pay a tax debt.­
Mark Green with the IRS holds a guitar owned by singer Peabo Bryson in 2003. Much of Bryson's things were being auctioned off to pay a tax debt.­
AP Photo/Erik S. Lesser

Up until now, most of the mistakes on our list were the sort that result in penalties and hassles. Missing tax credits and deductions can sting in a different way, since you can end up paying way too much when you file. You wouldn't be alone. In fact, Americans overpay taxes by almost a billion dollars every year [source: Johnson].

To make sure you don't contribute to that figure, pay close attention to any tax credits or deductions that apply to you. Tax credits are particularly valuable and work by directly reducing the amount of taxes you owe. For instance, people with children can often receive a $1,000 credit, assuming their income doesn't disqualify them. Deductions work by reducing the amount of taxable income the IRS considers when determining what an individual owes. Charitable donations, mortgage interest, medical expenses -- there are a number of costs that qualify as itemized deductions. If those itemized deductions add up to be greater than the standard deduction (determined by your filing status), then they can lower your taxable income. Less taxable income translates into less money going to Uncle Sam and more money in your pocket.

If you're interested in itemizing your deductions, you might want to pay particular­ attention to avoiding the next mistake on our list.