It’s that special time of year again.
A time when pencils, pens, calculators and keyboards are a flurry with activity. It’s all about crunching the numbers and meeting that all-important deadline.
Yes, it’s tax time.
Don’t panic. Breathe. Everything will be fine.
Feelings of anxiety are common at this time of year when it comes to dealing with getting those income tax forms completed and returned on time.
“This feeling comes from having to deal with the IRS, ensuring everything is going to be accepted by the IRS, getting the refund they’ve been told they would receive and no questions asked from the IRS,” said owner of the Liberty Tax Service office in Union Katherine Pendergrass. “Some people also want to make certain they can get their money quickly, especially before the IRS runs out of money.”
She added people also tend to have an underlying fear of being audited by the Internal Revenue Service.
Tax preparation isn’t an easy task.
“Absolutely not,” Pendergrass said. “A lot of people want to believe it’s easy but it takes patience and keeping up with updated tax information.”
That task in itself can be daunting.
“You know, Congress never leaves anything alone,” said H&R Block Union franchise owner Bob Holley. “They just make it more and more difficult.”
He said 20 years ago minor changes in tax laws might throw a wrench into some people’s tax preparations, but they were nothing like the changes the IRS implements now each year.
“For the last 15 years, it’s been big stuff every year,” Holley said.
The IRS Web site — www.irs.gov — is full of information about changes in effect for this year, from new tax credits to changes in the amounts for certain deductions. There’s a lot of information to go through.
“It can be done,” Holley said about filing taxes on your own. “It just takes some time to do it.”
Some people have plenty of time to do their own taxes, Holley said, but reiterated it can be a time consuming task. He has seen people with rental properties and a slew of other tax-related items do their own income taxes correctly.
Others use tax preparers like H&R Block, Liberty Tax Service, Jackson-Hewitt Tax Services and others — including their own personal CPAs.
The accountants and tax preparers do the work and know how and where tax rules and regulations have changed. They do the research and keep their clients informed.
But even then, people still can become overwhelmed with the process or even thought of getting their taxes done.
Holley said his No. 1 piece of advice to people when it comes to filing their taxes is to do it electronically.
“There’s some extra checks put in to make sure it’s accurate,” he said.
By filing electronically, a person knows almost immediately — within a day or two — if there is something wrong with their work. If a person is filing by mail, Holley said “it can take quite a while” to find out if everything is correct or not.
Put faith in a tax preparer — that’s how Pendergrass says a person can get over those anxious feelings when it comes to tax time.
“Have faith in your tax preparer as the two of you work together to make certain all your information is submitted correctly,” she said.
TOP FIVE TAX PREP TIPS:
Katherine Pendergrass, owner of the Liberty Tax Service office in Union, offered these five tips to take the anxiety out of getting your income taxes done:
1. Make certain you have enough taxes taken out of your wages. At the end of the year, you might need to re-evaluate how you filled out your W-4 forms to ensure the correct amount.
2. Make certain to take all your pertinent information with you when having your taxes prepared.
3. If you itemize, keep accurate records of everything.
4. Never give your or your child’s Social Security number to anyone else to use.
5. Don’t rush to use your paycheck stub to file your taxes because the stub and your W-2 might have different amounts. Plus, the IRS does not allow you to file with using your pay stub.
A NEW OPTION FOR YOUR FEDERAL TAX REFUND:
If you are receiving a federal tax refund this year, the federal government is giving taxpayers another option. You now can choose to use that refund to purchase a U.S. savings bond. The IRS says these are six things you’ll need to know about using your federal refund to purchase a savings bond:
1. You can use a portion of your refund to purchase up to $5,000 in U.S. savings bonds.
2. The total amount of savings bonds purchased must be a multiple of $50.
3. The bonds will be issued in your name. For married taxpayers filing a joint return, the bonds will be issued in the names of both spouses.
4. You will receive the U.S. savings bonds in the mail.
5. You normally select this option by filing Form 8888, Direct Deposit of Refund to More Than One Account.
6. Form 8888 has step-by-step instructions on how to select this option and how to specify the amount of your refund you want to use to purchase savings bonds.
IRS TIPS ON HOW TO CHOOSE A TAX PREPARER:
Here are eight tips from the Internal Revenue Service on how to choose the best tax preparer:
1. Check the person’s qualifications. Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
2. Check on the preparer’s history. Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys.
3. Find out about their service fees. Avoid preparers who base their fee on a percentage of the amount of your refund or those who claim they can obtain larger refunds than other preparers.
4. Make sure the tax preparer is accessible. Make sure you will be able to contact the preparer after the return has been filed, even after April 15.
5. Provide all records and receipts needed to prepare your return. Most reputable preparers will request to see all your records and receipts and will ask multiple questions.
6. Never sign a blank return.
7. Review the entire return before signing.
8. Make sure the preparer signs the form. A paid preparer must sign the return as required by law.
JACKSON HEWITT PROVIDES INFO FOR UNEMPLOYED TAXPAYERS:
With a national unemployment rate still hovering around 10 percent and local unemployment even higher, Upstate residents continue to feel the financial pinch. The local offices of Jackson Hewitt Tax Service highlights several critical tax considerations unemployed consumers need to be aware of that may help them when it comes time to file – including a new tax benefit exempting the first $2,400 of unemployment compensation from their taxable income.
Here are the four top tax issues individuals unemployed in 2009 need to be aware of:
• Recently signed Workers, Homeownership and Business Assistance Act of 2009 extends unemployment benefits. The provision provides another 14 weeks of benefits to all unemployed individuals who have exhausted their benefits or will do so by the end of the year. In states where the unemployment rate is at 8.5 percent or higher, individuals will receive an additional 6 weeks.
• Understand the tax free unemployment benefit for 2009: In most tax years, all unemployment compensation received is considered taxable. But for one year only under the American Recovery and Reinvestment Act (ARRA), up to the first $2,400 of unemployment compensation that an individual receives in 2009 is tax free.
"For example, if you received $5,000 in unemployment compensation, you will only be taxed on $2,600," said Enrolled Agent Dan Thomas. "For a single taxpayer, this could mean a savings of as much as $240 in income taxes. Married taxpayers who both received unemployment benefits during 2009 will see even greater savings, given they are each eligible for the exclusion."
• Document and deduct qualified job search expenses: Those small job search expenses can add up fast. But when documented properly, many are also tax deductible. Common job-seeking expenses that often qualify include fees for resume development and professional services, long distance calls, mileage driven to job interviews and other travel expenses like airfare or tolls. Start compiling your receipts and logs now so you can ensure you present all expenses to your tax preparer to see if they are qualified deductions.
• Ask a tax professional for help: Beyond providing information on handling unemployment compensation and helping job seekers learn which expenses qualify for deduction – there are other reasons for unemployed individuals to seek help on their tax returns. It is important to work with tax preparers who are up to speed on all recent changes to tax law, provide free electronic filing (IRS e-file), offer guarantee of service and will be available to you year-round for any questions you may have.
JACKSON HEWITT ALERTS TAXPAYERS TO EIC INCREASES:
Thanks to the American Recovery and Reinvestment Tax Act of 2009, it is estimated that an additional $7.4 million* will be available to American taxpayers through new benefits under the Earned Income Tax Credit (EITC), according to Jackson Hewitt Tax Service®. With increases in income limits and higher credit amounts, as well as a new rule offering $629 in additional credit for taxpayers with three or more children, taxpayers have a host of reasons to learn about this popular credit prior to filing a 2009 tax return.
The following represents the higher overall EITC amounts for tax year 2009, based on the number of qualifying children per taxpayer (see further details on eligibility below):
• $5,657 credit with three or more qualifying children (NEW)
• $5,028 credit with two qualifying children (up $204)
• $3,043 credit with one qualifying child (up $126)
• $457 credit with no qualifying children (up $19)
"These beneficial changes further strengthen the importance to inform taxpayers who may qualify for the Earned Income Tax Credit of the significant tax benefits, included increased dollar credit amounts,” said Jackson Hewitt Tax Service Enrolled Agent Dan Thomas. "The addition of a higher credit for large families, higher income limits, and larger credit amounts can help in these tough economic times. We encourage taxpayers to speak with a knowledgeable tax preparer to see if these changes can put more money in their pocket."
Thomas reminds residents that there are a number of qualifications to determine eligibility for the EITC. Some of the specific qualifications include:
• The credit only applies to taxpayers who have earned income, such as wages, tips, salary, income from self-employment and other taxable compensation.
• Income thresholds to qualify for EITC have increased, most notably for individuals with three or more children. Only taxpayers with total earned income and adjusted gross income (AGI) less than the following amounts qualify for the credit :
• Income limit for a taxpayer claiming three or more children: $43,279 (48,279 if married filing jointly)
• Two qualifying children claimed: $40,295 ($45,295 if married filing jointly)
• One qualifying child claimed: $35,463 ($40,463 if married filing jointly)
• No qualifying children: $13,440 ($18,440 if married filing jointly)
• A child claimed as a qualifying dependent must adhere to the Uniform Definition of a Child by being under the age of 19, having the same place of residence as the taxpayer (for at least half of the year) and being related to the taxpayer as defined in the U.S. tax code (for example, as a child, stepchild, foster child or descendant of these). If the child is the qualifying child for more than one person, special rules apply.
• New this year, the child must also be younger than the taxpayer claiming that child (unless the qualifying child is disabled) and not have filed a joint return other than for a claim of refund.
• Grandparents, aunts, uncles, and older siblings may claim a child as their qualifying child, provided they shared a residence with the child for more than six months of the tax year.
• A taxpayer with no qualifying child may claim the credit if he or she is at least 25 years old, but no older than 65 at the end of the year, and is a resident of the U.S. for more than half the year.
• For members of the military, there is an option of treating combat pay (which is non-taxable) as income for purposes of calculating the Earned Income Tax Credit – and thereby potentially increasing a tax refund.