Credits

• A tax credit directly reduces the amount of tax you owe to the IRS by a dollar amount. There are several tax credits oft overlooked by anxious tax filers. For example, two educational credits are available including the American Opportunity Credit, which reimburses you up to $2,500 in out-of-pocket tuition expenses for the first four years of college. For students who attend more than four years of college, the Lifetime Learning Credit will refund up to $2,000 in out-of-pocket tuition expenses each year.
  
  Many tax filers also commonly miss the saver's credit. The credit reimburses you up to $1,000 for half of your retirement contributions to an IRA or 401(k) if you meet financial eligibility guidelines. Many low-income and middle-income households qualify for the credit, but the IRS adjusts eligibility requirements yearly.
  
  

Deductions

• Unlike a tax credit, which decreases your tax bill, a deduction reduces the amount of your taxable income. Some deductions are easy for taxpayers to remember, such as the homeowner mortgage interest deduction or the deduction available for charitable cash contributions to a nonprofit organization. However, others are regularly overlooked, including deductions for moving-related expenses, non-cash charitable contributions, self-employment tax and your out-of-pocket job-related expenses. Additionally, if you are self-employed, you can deduct 100 percent of the premiums you paid for health insurance. If you are not self-employed, you can still deduct the amount of your medical expenses--including health insurance premiums--that exceeds 7.5 percent of your adjusted gross income.
  
  

Temporary Modifications

• Occasionally, Congress will pass temporary modifications to the U.S. tax code that provide time-sensitive tax credits and deductions. It's easy to miss these temporary tax cuts if you or your tax preparation consultant is not aware of the tax provisions in new legislation. For example, between 2008 and 2010, Congress initiated an incentive to first-time homebuyers that awarded them with a one-time federal income tax credit of up to $8,000--an expensive credit to miss. The incentive expired in September 2010.
  
  

Mistakes

• If you file your income taxes before realizing that you qualify for additional deductions and credits, you may amend your tax return for up to three years to attempt to recover the money the IRS may owe you. Complete and submit IRS Form 1040X to make adjustments. You will need to have your original tax filing forms available, as you must enter both the original information you filed, as well as the new adjusted information. The IRS will review the form and determine whether you qualify for a refund.