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CPA Alert - Can I backdoor my sales tax deduction?

S

s0me0nesmind1

Lifer
Tax Time 2014 🙂 -

I have a quick question in regards to sales tax deduction.

I'm looking to maximize my deduction for sales tax, and I spent a ton of money this year thanks to a wedding (and other general expenses). All around, Mint (and my credit card statements) have kept a good account of how much I have spent. I figured it would be reasonable like many other divisions of the tax world to be able to backdoor the actual tax amount and apply it to my deduction for my 2014 returns

My expenses totalled ~$100k Multiply it times the tax amount of ~8.25% and I have ~$8250 paid in state sales tax for the year. Given, I will make it more certain by making sure not to account for untaxed items such as groceries. Nevertheless, this amount comes NOWHERE CLOSE to the TurboTax estimate of ~$1,500


So for anyone that is a CPA (*looks at you, CPA) and knows the legality of this stuff... mind giving me some advice?
 
BoomerD said:
NOT a CPA, but...

http://www.irs.gov/Individuals/Sales-Tax-Deduction-Calculator
Click to expand...

Correct, I understand, that's what I'm asking - No one saves their receipts for the entire year. But I can pull up my credit card statements for the entire year. In fact, thats what I'm basing my answer on (Mint).

Thus I am backdooring my sales tax amount by taking the total gross amount * my state and local tax rate. This is commonly done in corporate tax accounting. I'm wondering if it's okay to be done in individual tax returns.
 
rcpratt said:
I would certainly hope that a credit card statement would suffice these days. Or am I just naive.
Click to expand...

The benefit to buying almost everything online and mostly through Amazon is being able to print out a receipt whenever necessary
 
Well, first of all, your math is incorrect. If you spent $100, and the sales tax is 8.25%, that doesn't mean you paid $8.25 in tax. You actually only pay $7.62.
(Edit; n/m, I see the ~ in the OP)

Also, I don't know which state you're in, but is absolutely everything taxed at that rate? Is food taxed at that rate? Utilities? Etc. - That's why you need receipts - to prove the amount of tax you actually paid.
 
DrPizza said:
Well, first of all, your math is incorrect. If you spent $100, and the sales tax is 8.25%, that doesn't mean you paid $8.25 in tax. You actually only pay $7.62.
(Edit; n/m, I see the ~ in the OP)

Also, I don't know which state you're in, but is absolutely everything taxed at that rate? Is food taxed at that rate? Utilities? Etc. - That's why you need receipts - to prove the amount of tax you actually paid.
Click to expand...

Yep. You can claim almost anything on your taxes...as long as you can back it up if/when you get audited.
 
DrPizza said:
Well, first of all, your math is incorrect. If you spent $100, and the sales tax is 8.25%, that doesn't mean you paid $8.25 in tax. You actually only pay $7.62.
(Edit; n/m, I see the ~ in the OP)

Also, I don't know which state you're in, but is absolutely everything taxed at that rate? Is food taxed at that rate? Utilities? Etc. - That's why you need receipts - to prove the amount of tax you actually paid.
Click to expand...

That's why I mentioned groceries as an example of what I would take out as commonly not taxed (at least the food portion).

As far as I know, all sales tax items are charged at the same rate in my state. Anything else would be a different type of tax.
 
s0me0nesmind1 said:
That's why I mentioned groceries as an example of what I would take out as commonly not taxed (at least the food portion).

As far as I know, all sales tax items are charged at the same rate in my state. Anything else would be a different type of tax.
Click to expand...

Also keep in mind there may be a limit on tax paid on single higher dollar items.
 
I can't help at all but I just came in to say that when I read your thread title it sounded like you wanted to cram your sales tax deduction in your butt.
 
Not a CPA, but this is a pretty straightforward situation. If you can substantiate the actual state/local sales tax paid, you can claim it if that works in your favor (vs. claiming state/local income tax).

Now if that figure is going to appear very high compared to your income and attract undue attention, then think like an auditor. An auditor is going to see you can document your spending - so far, so good. Then you will be asked how you know which expenses were subject to sales tax and which were not.

For example, let's say you have a $662 Best Buy charge on your statement. You say it was for a soundbar but the credit card statement doesn't show any detail. The auditor says you could have bought $600 in gift cards plus a Monster HDMI cable. Gift cards are not taxed. You can't provide more detail, and he allows only $55.

I'm not saying that's how it will go down, but you have to consider the possibility.
 
kranky said:
Not a CPA, but this is a pretty straightforward situation. If you can substantiate the actual state/local sales tax paid, you can claim it if that works in your favor (vs. claiming state/local income tax).

Now if that figure is going to appear very high compared to your income and attract undue attention, then think like an auditor. An auditor is going to see you can document your spending - so far, so good. Then you will be asked how you know which expenses were subject to sales tax and which were not.

For example, let's say you have a $662 Best Buy charge on your statement. You say it was for a soundbar but the credit card statement doesn't show any detail. The auditor says you could have bought $600 in gift cards plus a Monster HDMI cable. Gift cards are not taxed. You can't provide more detail, and he allows only $55.
Click to expand...


We had a wedding in 2014 (which would be obvious from the first year of filling jointly, name changes, etc...). So it was an expensive year. Add on a honey moon, 2 international trips, and more travel... it was quite an expensive year.

Our Total income is ~$140k Gross (Before 401k/medical, etc..). Total spent for the year I'm getting is ~$100k.

The total "Estimate" from TurboTax is ~$1,500 in State/Local taxes... you gotta be shitting me.
I'm not saying that's how it will go down, but you have to consider the possibility.

Either way, some CPA that does this stuff for others on a semi normal basis opinion would be appreciated.
 
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Do you pay state income taxes? How much were those vs. your estimated sales tax? If it's not a big difference it may be easiest to just claim the state and local income tax instead of sales tax.
 
s0me0nesmind1 said:
Add on a honey moon, 2 international trips, and more travel... it was quite an expensive year.
Click to expand...

Airfare and hotel and other types of travel related things don't charge sales tax and would not be deductible. Depending on state also rental of a wedding venue, paying a DJ or band, etc. wouldn't have sales tax either.
 
You have two choices - go with actual sales taxes paid (you have to support with receipts. Sorry, cc statements are not a substitute in an audit) or use the sales tax tables. If you use the table, you can add taxes paid for vehicles, boats and major home renovations. Alas, weddings is not one of the add-ons.

Believe it or not, some of us do or have used the actual method supported by receipts. Man, it's a pain, though.
 
MixMasterTang said:
Airfare and hotel and other types of travel related things don't charge sales tax and would not be deductible. Depending on state also rental of a wedding venue, paying a DJ or band, etc. wouldn't have sales tax either.
Click to expand...

Yes, I figured all of that. I know airports are federally regulated, hence, no state and local tax, etc.. Services, etc...

Also, I am in Texas - No State income taxes. So it obviously moved to Sales tax.
 
s0me0nesmind1 said:
We had a wedding in 2014 (which would be obvious from the first year of filling jointly, name changes, etc...). So it was an expensive year. Add on a honey moon, 2 international trips, and more travel... it was quite an expensive year.
Click to expand...
Directly from the IRS instructions for 1040 schedule A (far right column, in the middle, of page A3): http://www.irs.gov/pub/irs-pdf/i1040sca.pdf
　
"Caution!
You must keep your actual receipts showing general sales taxes paid to use this method."

End of story, you need actual receipts.

That said, you probably didn't pay that much sales tax anyways. Your big expenses that you list are often not covered by sales tax. As far as I know, airfare taxes aren't deductible (unless a legitamate business expense) and are not considered sales tax. Foreign purchases on your travels are not "state and local general sales tax" even though the value added tax (or similar) tends to be very high. I don't know about Texas, but in many states wedding services are often not taxed either. Your total sales tax is probably far, far less than the $8250 you mention. For the rest, you can probably go to the stores for the big purchases and ask for a duplicate receipt.

And now is a great time to remember to save ALL of your receipts. Just stuff them in a box when you come home, and if you have another big spending year (you are married now, expenses may go way up), then you can choose to go through them.
 
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CPA said:
You have two choices - go with actual sales taxes paid (you have to support with receipts. Sorry, cc statements are not a substitute in an audit) or use the sales tax tables. If you use the table, you can add taxes paid for vehicles, boats and major home renovations. Alas, weddings is not one of the add-ons.

Believe it or not, some of us do or have used the actual method supported by receipts. Man, it's a pain, though.
Click to expand...

Yeap, thats kind of what I figured. Thanks for clarifying.

That is absolutely insane, by the way - to keep all your receipts.

1) If I kept all my receipts, it would end up being a stack as big as a room.
2) The time it takes to add up the sales tax one-by-one at the end of the year... /facepalm
3) I've seen PLENTY of receipts that deteriorate over-time. By the end of the year, they will have faded away and I wouldn't be able to read them. Not sure if you guys know what I'm talking about here...

This is absolutely insane. Looks like I have to go with the estimate which will end up fucking me over big-time.
 
I place receipts in an envelope during the week.

Come the weekend, I will scan them in.
Enter them into a spreadsheet along with the scanned file name
Spreadsheet has codes that correspond to line items on the Schedule C and the business Expense form for Schedule A.

One can also use a 3rd party accounting type package, but it will only save you a short amount of time when using tax importing;

Spreadsheet and image files then get burned onto a CD and attached to filing copy of tax returns. Receipt envelope is also attached if needed.
 
s0me0nesmind1 said:
Yeap, thats kind of what I figured. Thanks for clarifying.

That is absolutely insane, by the way - to keep all your receipts.

1) If I kept all my receipts, it would end up being a stack as big as a room.
2) The time it takes to add up the sales tax one-by-one at the end of the year... /facepalm
3) I've seen PLENTY of receipts that deteriorate over-time. By the end of the year, they will have faded away and I wouldn't be able to read them. Not sure if you guys know what I'm talking about here...

This is absolutely insane. Looks like I have to go with the estimate which will end up fucking me over big-time.
Click to expand...

Yes, it's a huge PITA...but necessary if you want to take the larger deduction for the sales tax.


cabri said:
I place receipts in an envelope during the week.

Come the weekend, I will scan them in.
Enter them into a spreadsheet along with the scanned file name
Spreadsheet has codes that correspond to line items on the Schedule C and the business Expense form for Schedule A.

One can also use a 3rd party accounting type package, but it will only save you a short amount of time when using tax importing;

Spreadsheet and image files then get burned onto a CD and attached to filing copy of tax returns. Receipt envelope is also attached if needed.
Click to expand...

Something like "Neat Desk" scanner would work well...their software seems to be pretty well done.

disclaimer: I don't have one...and don't need one, but I set one up for my neighbor a couple of years ago and did some scanning for him to "teach" him how to use it. (the guy was a techno-idiot)
 
cabri said:
I place receipts in an envelope during the week.

Come the weekend, I will scan them in.
Enter them into a spreadsheet along with the scanned file name
Spreadsheet has codes that correspond to line items on the Schedule C and the business Expense form for Schedule A.

One can also use a 3rd party accounting type package, but it will only save you a short amount of time when using tax importing;

Spreadsheet and image files then get burned onto a CD and attached to filing copy of tax returns. Receipt envelope is also attached if needed.
Click to expand...

This is what I started doing this year. Taping all my receipts to 8.5x11 and then scanning them in weekly. Enter receipt values as I spend into a spreadsheet. We'll see if it adds up this year or not.
 
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