What’s your plan of a tax?
ESCANABA – While no one may be able to avoid death or taxes, there are a few things taxpayers should know to make this tax season more bearable.
“For most people – the middle class folks that we deal with – there’s not going to be a lot of changes,” said Alan Stotz, principal CPA at Anderson, Tackman & Company, PLC in Escanaba.
Thanks in part to the pressures of the “fiscal cliff” the country faced at the end of last year, many of the tax laws that directly affect individuals have not changed.
“There was the alternative minimum tax that was going to affect a lot of people that they fixed and left permanent, which is something they hadn’t done before,” said Stotz.
The AMT was enacted by Congress in 1969 to ensure wealthy individuals and corporations pay a minimum amount and cannot use their exclusions, deductions, or credits to avoid taxes.
However, until the permanent patch earlier this year the AMT was not automatically adjusted for inflation forcing millions of middle class Americans to pay higher taxes.
“They’ve only changed it year to year, making a little bit of a patch to fix it. Now they’ve made it permanent so they actually did some decent things with that,” said Stotz.
Not only will many taxpayers avoid the AMT, but many may qualify for other credits, deductions, or exemptions.
“If you’ve got kids in college there’s dollars available out there for you as a credit. Make sure you get all of that information from the college,” said Stotz.
To receive college tax credits, students or their families will need to have a copy of their 1098-T, which is sent out by the educational institution.
Another way many taxpayers will save money is through the Earned Income Tax Credit, which benefits working people who have a low to moderate income. However, those taxpayers who qualify for the credit should be prepared to answer more questions this year.
“There’s been fraud in that area. Consequently, the IRS is requiring us as preparers to ask more questions of the people that come in who qualify for it,” said Stotz. “They want to make sure that they really do qualify for it.”
Because the IRS is working harder than ever to limit the number of people receiving refunds who do not deserve them, taxpayers – particularly those receiving the EITC – may see delays in receiving their tax return.
Once taxes are filed, taxpayers can track their refund online using the “Where’s my refund” page on the IRS’s website, irs.gov.
“They require a little bit of information to make sure they know who you are and that you’re not somebody else just trying to find out where somebody’s refund is, but they will tell you when the estimated date for your refund would be or if there’s a review on your return,” said Stotz.
The Michigan State Department of Treasury also allows taxpayers to track their state returns online at michigan.gov/iit.
In addition to slower returns, many people who are filing their taxes may need to delay filing while newly required documents – such as the 1098-T – are mailed, and those claiming depreciation on property will have to wait for the IRS to sync its system with new laws.
“If you’re claiming depreciation we can’t file those returns yet,” said Stotz. “The changes Congress made affected those areas and the IRS has yet to work out the bugs in that system to get it all to comply with what Congress passed.”
Stotz predicts the earliest returns involving depreciation claims will be fileable is late February or early March.
Changes have also been made to state income taxes that affect senior citizens including changes to retirement exemptions and home heating credits.
“People that are retired don’t get quite as much of the benefit as they much did,” said Stotz.
Seniors born before 1946 have no change to their retirement taxes and do not have to pay taxes on Social Security. Seniors born later, however can expect to see changes.
“If you were born in ’46 through ’52, now, instead of getting the more generous exemption that they used to provide, you only get ($20,000) on a single return and 40 on a joint return,” said Stotz.
While home heating credits are still available, only those with household resources below $50,000 are eligible for the credits, and senior citizens age 65 and older will not receive an extra exemption based on age as they have in past years.
“Household resources is different than income. They consider pretty much any dollar that walks into your house as household resource whether you pay taxes on it or not,” said Stotz, adding household resources include Social Security payments.