DEARBORN – As tax season approaches in the United States, many individuals and families — especially newcomers and small business owners — face growing challenges in navigating the complex tax system and keeping up with ongoing legal changes.

In an interview with The Arab American News, tax expert Mahmoud Serhane of Integral Accounting and Tarraf CPA in Dearborn offered a practical, easy-to-follow overview to help taxpayers avoid common mistakes, stay compliant and maximize available deductions and credits during the current filing season.

Serhan emphasized that tax season should not be viewed merely as an annual burden, but rather as a valuable opportunity to reassess one’s financial situation and better understand taxpayer rights. He noted that lack of awareness often leads to unnecessary financial losses or errors that can result in penalties.

How the U.S. tax system works

Serhane explained that the U.S. operates under a progressive tax system, meaning tax rates rise as income increases. Residents are taxed on income earned both inside and outside the United States.

For most employees, Social Security tax is automatically withheld at 6.2 percent and Medicare tax at 1.45 percent throughout the year. Final calculations are made when filing the annual return, which may result in a refund if excess taxes were paid.

New updates and expanded deductions

According to Serhane, this year’s tax season includes legislative updates that could ease the burden for a broad range of taxpayers, particularly service workers and middle-income families.

Among the most notable changes:

• A new qualified tip deduction of up to $25,000

• A special deduction for overtime wages, capped at $12,500 for individuals and $25,000 for married couples filing jointly

• A deduction for qualified auto loan interest, up to $10,000

“These updates could make a meaningful difference for working families if properly applied,” Serhan said.

Key credits for families

Serhane stressed that many families overlook valuable tax credits each year, including:

• The Child Tax Credit, now reaching up to $2,200 per qualifying child under age 17

• The Child and Dependent Care Credit, which helps offset daycare or after-school care expenses for working parents

• The Earned Income Tax Credit (EITC), one of the most significant benefits for low- to moderate-income households, often missed due to filing errors or misunderstandings of eligibility rules

Education-related tax benefits

Students and families paying for college or vocational education may also qualify for several important tax advantages, including:

• The American Opportunity Tax Credit, worth up to $2,500 during the first four years of higher education

• The Lifetime Learning Credit, up to $2,000

• A deduction of up to $2,500 annually for student loan interest

• A dependent credit that can include older children or financially supported elderly parents

Employees vs. self-employed taxpayers

Serhane noted that one of the most misunderstood areas involves the difference between employees and self-employed individuals or small business owners.

While employees receive a W-2 form and have taxes automatically withheld, self-employed workers receive 1099 forms and must pay their federal and state taxes themselves, along with a 15.3 percent self-employment tax covering Social Security and Medicare — often through quarterly estimated payments.

However, business owners benefit from broader expense deductions and may qualify for the Qualified Business Income deduction of up to 20 percent.

Preparing early and avoiding penalties

Serhane urged taxpayers to prepare early by organizing key documents, including W-2 and 1099 forms, education records, mortgage statements, and a copy of last year’s return to reduce errors and omissions.

He added that tax preparation software may be sufficient for simple situations involving single income sources and stable family status. More complex cases — such as multiple income streams, self-employment or special family circumstances — are best handled by a qualified tax professional.

To avoid penalties or audits, Serhane emphasized accuracy, reporting all income sources, selecting the correct filing status and meeting the April 15 deadline.

Michigan-specific considerations

At the state level, Serhane explained that Michigan applies a flat income tax rate of 4.05 percent for all residents, regardless of income level, with additional local taxes in some cities, including Detroit.

Michigan also imposes a 6 percent corporate income tax on large companies, while offering alternative tax structures for small entities such as LLCs and S-Corporations.

Planning ahead pays off

Serhane concluded by stressing that organization and forward planning are the keys to a successful tax season. He encouraged families to update their records after major life changes such as marriage, childbirth or divorce, and to take advantage of retirement contributions — which not only strengthen long-term financial security but can also reduce current tax liability.