Piles of receipts. Complicated forms. Boxes to check and numbers to fill in. Its that time of year again. Tax time.
And despite all the political talk year after year about making the tax codes simpler, local accountants say it only gets more complicated.
One thing I know for sure is that every time there is discussion in the media about tax simplification or reform, it usually gets more complicated, said Chuck Fredrick of FredrickZink & Associates.
Legislators and the Internal Revenue Service make numerous changes to the tax and filing rules each year. People who file using a 1040 form will sift through changes in more than a dozen categories before filing this year, according to a Whats New page on the agencys website. The changes include:
Standard adjustments to automobile mileage rates for cars used for business, which increased in 2011 to 51 cents per mile and 55 cents per mile after June 30 last year.
First-time homebuyer credit rules also changed.
Reporting rules for capital gains, retirement accounts, health-care savings accounts and foreign assets.
According to the National Taxpayers Union, our U.S. tax code is a complicated mess, far too complex for average taxpayers to understand.
And forget the rules, just the forms themselves are getting more complicated, Fredrick said.
More people locally have turned away from paying someone to do their taxes and tried to go it alone in recent years to save money in the ailing economy, Fredrick said. But mistakes and struggles with the process, coupled with some improvement in economic conditions, have brought customers back, he said. And theyre often quick to explain why they returned.
I wasted four (expletive) hours trying to do this last night, and I will never do that again, one woman told Fredrick as she handed over her documents.
But there are things people can do to keep their professional tax-preparation costs down, Fredrick said.
Organization is key.
Fredrick said consumers will pay less if they spend some time organizing their receipts and documents.
We encourage people to put extra time into organizing so that we can spend our time on the technical issues and not cleanup, he said.
Locals also can save a little cash if they complete the IRS paperwork themselves but just pay a local tax professional to check their work.
But if locals want to go it alone in their tax filing this year, there are some things to consider when trying to stay out of trouble with the IRS. Common pitfalls of self-filers include mistakes surrounding retirement and investment accounts, such as 401(k) accounts, Fredrick said.
When consumers buy and sell and move around their retirement investments through a brokerage firm, they often will receive a 1099 form. The form shows the full dollar amount of stock sales in the previous year, but taxpayers must pay taxes only on the profits those transactions garnered. If numbers are simply copied from one form to another, it could create a sticky situation, one where the taxpayers tax burden is calculated different than it should be, he said. Someone could end up paying more than is necessary or too little.
Cashing out retirement accounts and IRAs to get through a financial crisis stemming from job loss or other struggles at home also has landed some local taxpayers in hot water with the IRS. Penalties, taxes and other financial implications taxpayers may not be aware of can result.
A home foreclosure also can complicate things at tax time, Fredrick said. A banks losses on a property can be considered income for the person who lost the home, he said.
And those are just a few of the things that can trip up taxpayers trying to fly solo as they file, Fredrick said. Knowing when to seek professional advice along the way is advantageous, he said.
He suggests choosing a tax adviser that locals feel at ease with someone who locals feel they can ask questions of and feel they can build a long-term relationship with.
If I make you feel like youre bugging me when you call with questions, you probably wont call that much and wont get the advice you need, Fredrick said.
hscofield@durangoherald.com
Reader Comments