Thursday, Oct 23, 2014

Tax crunch looms as deadline nears


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SEBRING It’s income tax crunch time for tax preparers and individuals working toward the April 15 deadline, and that crunch is heightened this year with the delay in the opening of the filing season.

The latest IRS data shows it has received 5.2 percent fewer individual tax returns so far compared to a year ago, and the total processed returns are down 6 percent from a year ago. But the number of visits to the IRS website, IRS.gov, is up 22.5 percent from 179.7 million to 220.1 million.

“The IRS has been a real pain this year,” said Betty Simmons, owner of Professional Bookkeeping Systems, Sebring.

Maybe she really can’t blame the agency because they will pass the blame right on to Congress, Simmons quipped, which, “made us late with everything this year.”

Normally, they e-file their returns by Jan. 10, Simmons said. This year the IRS said it would be 10 days later, on Jan. 20, but it ended up being Jan. 30 before anybody could e-file.

Due to the American Taxpayer Relief Act, which was approved Jan. 2, the IRS pushed back the opening of the tax filing season to provide additional time to complete and test updates to federal tax forms, programming and processing systems.

“So that started us out kind of behind to start with, and the only people who were getting refunds were the people who paid the big bucks for the refund anticipation loans,” Simmons said.

These people get their refund, but they pay a lot of interest to do that, she said.

“Most of us are backed up right now taking extensions,” she said. Most people she is working with who need extensions are either in a partnership or limited partnership and are waiting for further information in order to do their business returns.

Some people just procrastinate and she tends to have the same procrastinators every year, Simmons added.

Sebring CPA Carlos R. Roman said if individuals have a simple return they can use one of the free services the IRS offers. They just go online and pick a vendor and they can prepare their returns for free.

Common mistakes include taking deductions on things that are not deductible and forgetting to include income that they received, he said.

They think they can get away with it and not report it, but the IRS knows about it, he said. The 1099 forms, showing wages and payment, are forwarded to the IRS, particularly dividends and interest and sales of assets, Roman said. If it’s not included in the tax return, they will get a notice from the IRS.

If someone owns a business they should sit down with a tax professional to make sure they are taking deductions on all the allowable expenses, he said. Also, there are some breaks for business owners if they are paying health insurance.

“I do send people away who don’t need a CPA,” Roman said. “I shame them; I tell them you need to do this on your own.”

Looking ahead, Roman said 2013 will be “hard to swallow.”

Many of his clients will be in new tax brackets and will be subject to a new 3.8 percent tax on investment income. Also, they are losing their exemptions and their itemized deductions are being reduced, he said.

According to the IRS, a new additional medicare tax of 0.9 percent goes into effect starting in 2013 that applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately and $200,000 for all other taxpayers.

The IRS announced recently it will provide late-payment penalty relief to individuals and businesses requesting a tax-filing extension because they are attaching to their returns any of the forms that couldn’t be filed until after January.

The relief applies to the late-payment penalty, normally 0.5 percent per month, charged on tax payments made after the regular filing deadline, according to the IRS. This relief applies to any of the forms delayed until February or March, primarily due to the January enactment of the American Taxpayer Relief Act.

Also, the IRS warned about common tax scams such as including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits.

Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. The IRS advises this could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Thus far the average individual income tax refund is down 1.5 percent compared to a year ago from $3,030 to $2,985.

For more information check www.irs.gov.


mvalero@highlandstoday.com

(863) 386-5826

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