Cal Poly’s Tax Clinics Offer Tax Tips to Help You Maximize Your Return and Avoid Trouble

Charitable donations and contributions to your 401(k) can help you at tax time. However, to avoid an unwelcome letter from the IRS, you might want to do a little research before you write off that home office.

As W2 forms arrive, this is a good time to think about ways to maximize your tax refund or minimize your burden.  To help, Cal Poly’s two tax clinics have offered their Top Ten Tax Tips.

Due to the winter storms, the IRS announced that the tax deadline for Californians has been pushed back to Oct. 16. (Graphic: Sarah Davenport)

The Volunteer Tax Assistance Program (VITA) offers free tax help to qualifying taxpayers with $60,000 or less of gross income.

“The clinics represent a great opportunity for students to gain valuable accounting experience while helping members of the community,” said VITA director Trish Daughtrey.

VITA is most busy around tax time, but students working at the Low Income Tax Clinic (LITC) represent low-income clients involved in tax controversies year round. While there have been well-publicized IRS conflicts with celebrities, audits are not just for the wealthy, warns Lisa Sperow, executive director of the LITC.

“I think your chances of getting audited are a little better if you’re lower income because those are easier audits for the IRS to do,” Sperow said. “It  can be very easy for the IRS to audit someone who doesn’t have much going on verses a very complex issue.”

To help you get the most out of your tax returns – without getting a shocking notification  – Daughtrey and Sperow consulted with their teams to offer these top ten tips:

10.) Know who is eligible for the Earned Income Tax Credits.

The Earned Income Tax Credit (EITC) can help low- to moderate-income earners, especially with children. Yet low-income taxpayers who claimed it were 5 ½ times more likely to get audited than anyone else.  If you claim a child here, the child has to have lived with you more than half the tax year. And if you are married, you can’t claim the EITC using the single filing status.

Accounting students Nathan Nguyen (left) and Kaleigh Chi are two of the students who are helping members of the community while working at the Low Income Tax Clinic. (Photo: Jack Sann)

9.) Be aware of 401(k) withdrawals.

While contributing to a retirement account can save you tax money, remember that early withdrawals or defaulted 401(k) loans will result in an additional 10-percent income tax.

8.) Be aware of the Dec. 31 cutoff.

If you paid expenses before Dec. 31, 2022, they can be deducted from the 2022 tax return.  That includes property taxes, medical bills, and charitable contributions. If you are looking to file as “married filing jointly,” make sure the marriage happened before Dec. 31, 2022. Likewise, if you are recently divorced and planning to file as “single” or “head of household,” make sure the divorce decree was filed before Dec. 31, 2022.

7.) Claim a Working from Home (WFH) deduction – if it applies.

Many more Americans are working from home since the pandemic. But you can only claim the WFH deduction if you own a business or have self-employment income, such as freelancers and gig workers. (If you get a W2, then you can’t take these deductions, even if you work from home.) Deductions can include utilities, insurance, mortgage/rent and even depreciation.

The Cal Poly Orfalea College of Business prepares tax returns through the Volunteer Tax Assistance – VITA program. All tax returns are prepared by Cal Poly accounting students who have gone through extensive training and have passed the IRS and FTB volunteer exams. The returns are then reviewed by Cal Poly faculty and local certified tax professionals. (Photo: Joe Johnston)

6.) If you sold a home, be aware of capital gains taxes.

You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if you are filing jointly. That exemption is allowable only once every two years.

5.) Report self employment if your net earnings were $400 or more.

This especially impacts college students, who often work gig economy jobs, such as driving for Uber, or walking dogs through the Rover app.

4.) Bring all your 2022 tax documents.

If someone is assisting you, make sure you have all the needed documents, including W2’s, 1099’s, business/income expenses, childcare expenses, educator expenses for teachers, donations and more. Check your prior year’s return to help remember.

3.) Double, triple check your return for mistakes.

The most common reasons for e-file rejections are simple mistakes, such as name misspellings or errors with zip codes and social security numbers.

2.) File for free.

Every year, people spend hundreds of dollars to have a tax preparer do their returns. Yet, even paid professionals can make mistakes. If you want to file yourself, MyFreeTaxes.org offers free filing with virtual help for incomes $66,000 or less.

1.) Be aware of identity theft attempts.

Identity thieves thrive on tax season. Ignore texts or emails claiming to be from the IRS. The agency will only communicate with you via mail.

Pictured with Lisa Sperow ((back row, far left), the director of the Low Income Tax Clinic, are, back row, left to right, Kaleigh Chi, Stephanie Chan, Juan Camacho
Front Row: Emma Ferguson, Nathan Nguyen, Maddie Rowell. The LITC helps members of the community who have tax debts. (Photo: Jack Sann)