“To Itemize or Not To Itemize- that is the question” 

By Calvin Smith 

Executive summary: Every year millions of individuals and households are required to file an income tax return. However, much of the general public is unaware of how to optimize their tax return. Tax filing services, automated or provided by an accountant, can be expensive and time consuming. From my experience as a VITA (Volunteer Income Tax Assistance) volunteer for three years, I’ve found that one component of the tax return that can be especially time consuming is determining if it is more beneficial for the taxpayer to itemize deductions or to take the standard deduction. Navigating Schedule A (Form 1040) can be a frustrating experience, even for an accountant. Finding relevant tax guidance that corresponds with each line item and calculating phase outs and limitations can be extremely time intensive. As a result, individuals who may be better off itemizing their deductions often take the standard deduction to avoid the frustrating and confusing forms.

 My VBA project provides an easy to use calculator that not only determines which method (standard or itemized) will be most beneficial for the tax payer given their specific situation, but also provides instructions and guidance to help the tax payer enter the correct inputs into the calculator. The VBA project essentially walks the user through all potential deductions from Schedule A and applies the relevant calculations to determine the amount the user can itemize. Then, the program compares the total eligible itemized deductions against the standard deduction and recommends most beneficial method (standard or itemized) of tax filing.

A second potential application of this calculator exists. When tax payers are considering making a major tax planning decision that will impact how they itemize, like whether they should rent or buy a home that will have tax deductible interest, users can run a variety of scenarios to see how that tax planning strategy will impact their itemized deduction. The IRS does not require tax payers to pay more taxes than they are legally obligated to pay. The purpose of this project is not to promote tax evasion, but to help taxpayers structure their financial decisions in a more tax efficient manner and more easily utilize available deductions the IRS has made available. 

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http://files.gove.net/shares/files/15w/calbro5/Calvin_Smiths_VBA_Project_write_up.pdf