Question

How might an improper classification of a deduction as for or from AGI affect the itemized deductions on a taxpayer’s return? How might this improper classification have an effect on taxpayer’s state income tax liability

**Answers no need to be long. Several sentences will be acceptable. .**

Answer 1

Improper classification of a deduction as for or from AGI affect the itemized deductions on a taxpayer's return because deductible amounts of various itemized deductions (Casualty losses, medical expenses and charitable contributions etc.) are based on AGI. If improper classification is made then tax payer cannot take correct benefit of these itemized deductions.

Most of the states take figures of AGI from federal income tax return for the purpose of their tax amount determination. If there was improper classification of a deduction as for or from AGI in federal taxation then taxpayer’s state income tax liability cannot be correct. So improper classification also leads to incorrect calculation of taxpayer’s state income tax liability.