Note to taxpayers scurrying to meet Monday's filing deadline: Failure to itemize deductions is costing people nearly $1 billion in overpaid income taxes.
Overlooked mortgage interest and points, charitable contributions and state and local income taxes and property taxes were not taken into account on as many as 2.2 million returns in 1998, according to the General Accounting Office.
Those taxpayers took the more straightforward standard deduction even though they would have been able to deduct even more had they itemized. This cost taxpayers at least $948 million in overpaid taxes _ and half of those returns were prepared by a professional.
The GAO study, requested by House Majority Leader Dick Armey, is to be formally released Thursday. In a statement Wednesday, Armey said the report serves as a warning to taxpayers.
"The last thing people should have to do is pay more taxes than they owe," said Armey, R-Texas.
Tax law allows people to take the standard deduction or to itemize deductions using Internal Revenue Service schedule A, whichever amount is greater. Tax experts say it's best to run a comparison to determine which deduction is most beneficial; the report didn't attempt to figure out why people overlooked the potential larger deduction.
This year's standard deduction for most people is $4,550 for an individual, $7,600 for married couples filing jointly and $6,650 for heads of households. The deduction is larger for those over age 65 and those who are blind.
The GAO, which serves as Congress' investigative arm, estimated that the average overpayment in 1998 from failure to itemize was $438. About a quarter of taxpayers overpaid by more than $500.
Using information from lending institutions and employers for a sample of 1998 returns, the GAO estimated that 948,000 returns failed to itemize deductions for mortgage loan interest and points.
Examining Labor Department averages to measure other types of deductions _ charity, state and local taxes and real estate taxes _ the potential number of returns that should have included itemized deductions rose to 2.2 million.
(Copyright 2002 by The Associated Press. All Rights Reserved.)
