What is the deal with "Sales tax deduction"? I've obviously spent more on taxes than my $1050 dollars being estimated by the "Easy Guide". If I spent $40,000 on stuff throughout the year (I spent $10,000 in December alone paying for car repairs, vacation, etc. (i didn't buy anything while i was an intern and had savings, i'm not rich. lol)) at 9.6% sales tax, that's a $3840 break. Which yields me a greater return. But I don't have receipts for every tank of gas, cup of coffee, and dinner meals.
So should I estimate 9.6% of the money I spent this year or just use the easy guide? It's a difference of about $500 in my return.
I will tell you what I tell my clients, you can write off anything you want... until you get caught.
Its probably worth the gamble to get the higher refund, assuming you will be able to sleep at night and not worry about a letter from the IRS for the next 3 years, or have any kind of legal proceedings that might bring your return under additional scrutiny (Divorce, immigration, child support, etc are all factors to consider)
That being said, the outflows of money is not a good estimator for sales tax. I am not sure about in WA, but in NY things like unprepared foods (groceries) and clothing under a certain dollar limit do not have sales tax.
Also, I believe the sales tax you can deduct is strictly related to sales tax paid within the US. If you took a vacation to a foreign country a portion of that sales tax would likely not be deductible because it was paid to a foreign country.
I'm not an expert in this area. We typically just use the automatically calculated numbers unless someone has a big purchase like a car that they paid a lump sum of sales tax.
If you were ever audited you would have to substantiate the sales tax you claimed with receipts. CC statements are not sufficient proof. If you could not substantiate then you would either owe the tax, or get a tax attorney to argue your case in tax court if the examining auditor does not accept your argument that I spent 40,000 last year so I should be able to claim 9.6% of that for sales tax. If you are audited over this ($500) its not going to be worth the hourly charge of either an accountant or an attorney, so you will be looking at a self defense and likely just paying the money to make it go away.
Is the juice worth the squeeze? Its a roll of the dice.
Under funded and under staffed IRS = audit rates at an all time low (less than 1%). What's their potential recovery vs time spent on this audit. The IRS works on recoverable tax dollars per hour, same concept as any business, except they can levy your assets and try to put you in jail.
