Tax Tips – The Ides of April are Coming: File Early and Avoid Stress!

April 15. You know what that means.

It is the deadline for filing and paying income taxes. And waiting until the second week of April to fill out your forms and rush off to the post office is like waiting until Christmas Eve to buy gifts: It is unnecessarily stressful.

“Earlier is better,” said Michael Blair, owner of Blair & Associates, a Westminster company whose services include tax planning and preparation.

“Anybody who gets their taxes done between April 1 and April 15 risks a much higher probability that there’s going to be a mistake on that return,” said Blair. “That’s not to say that preparers aren’t qualified, but everybody procrastinates until the last minute, and so the preparers are trying to do 10 returns when they should be doing two.”

Jim Dupree, the Internal Revenue Service’s spokesman for Maryland, concurs. “If you’re waiting until the last minute, you could be setting yourself up for potential problems,” he said. “There’s a possibility you’ll make a mistake or forget to do something. That’ll delay us from processing your return. You might also overlook a tax benefit.”

But that is merely the simplest bit of advice. The experts also have recommendations on how to choose a tax preparer, what information people need to get their taxes done, and what new tax laws should be considered.
There is more than one way to complete your taxes: doing it yourself by hand, doing it with a computer program, or paying for a company or accountant to do the job.

“It’s all going to depend on your particular needs and how difficult it might be to do,” said Dupree. He estimates that about 20 percent of “paper returns,” those done by hand, have errors, while less than 1 percent of returns done with computer programs have mistakes.

“If you decide to do it yourself, and need help, it is a mouse click away at the IRS Web site [IRS.gov],” he said. “We run 24 hours a day, 365 days a year, with over 5,000 forms and publications, answers to frequently asked questions you might have; all sorts of tax scenarios.”

There is also telephone assistance from the IRS at 1-800-829-1040 (for individuals) or 1-800-829-4933 (for businesses), both of which operate Monday through Friday, from 7 a.m. to 10 p.m. Those in need of forms who do not get them online can call 1-800-829-3676.

TurboTax, one of the software programs, is free for simple federal tax returns. (See http://turbotax.intuit.com). More complicated federal returns cost $29.95, with the price going up to $49.95 for those with investments and rental property, $74.95 for combined home and business returns, and $109.95 for corporations, partnerships and limited liability corporations.

Those who earn less than $57,000 a year can take advantage of the IRS’ Free File program, which partners with the top tax preparation companies to offer computer program returns for free.

“Some of the companies will not do your state return for free,” said Dupree. “Everyone will do your federal return for free.”

In addition, he says, marylandtaxes.com offers free state tax returns regardless of the amount of income.
As for the Free File program, “It will ask you probing questions,” said Dupree. “As you answer the questions, it finds the appropriate forms. Answers are filled out, usually in the background. It’s very accurate. It’s easier for us to process. You get confirmation when your filings are received. And you can generally see your tax refund in as little as 10 days.”

For those who do not want to do their taxes themselves, there are several reputable places to get your taxes prepared, said Dupree. Along with businesses, there are churches and community centers staffed by volunteers, and the AARP also has free tax assistance and preparation for those 60 and older with low and moderate incomes.

With so many options, how do you find the right one?

“Do it like the way you choose a doctor,” said Dupree. Ask your friends and family members who they’ve gone to. You want somebody who’s going to be around awhile, not somebody who hangs a shingle out during the tax season and disappears, particularly if you have issues later on.”

He cautioned to stay away from anyone promising a refund without looking at your situation, and to turn away anyone that asks you to sign blank tax returns or have your refunds sent to their office.

“Check their professional credentials,” he said. “Sometimes people need folks that might represent you with the IRS if there’s an audit.”

If you do go to an accountant or tax preparation business, the best tip is to be organized.

At Blair’s company, those who are organized can save between 30 and 40 percent because their returns do not take as long.

“If you’re not organized, there’s a lot of things that have to be requested after the fact,” said Blair. “That adds to fees. That adds to returns. An organized client is a good client. They usually do better from the tax standpoint, too, because they keep track of things.”

Personal information can include W-2s, interest income statements, stock sale statements and receipts for charitable contributions, according to Blair and Lisa Gorsuch, who owns Maryland Bookkeeping, Accounting and Tax Service in Westminster.

“It’s time-saving on our part and the taxpayers’ part, if they do it as they go along throughout the year and set up a filing system,” said Gorsuch.

“Make sure you have receipts,” said Blair. “It seems very simple, but a lot of people do not do that. And when they scramble around for their receipts and information at tax time, it makes it stressful on them and for the preparer, and a lot of times they’re lost, too, and they get no deduction for them.”

Prices at Gorsuch’s company usually range from $150 to $300, with an average cost of $225. Prices at Blair’s company range from $200 to $300, although someone with a situation, such as having several rental properties, will have a higher cost.

Speaking of deductions, there are many available with this year’s returns. Some are new, and others are just more apparent because of the economy.

For those who have been laid off and are receiving unemployment, the first $2,400 is non-taxable, while the rest will be taxed, said Blair. Most of the time, taxes are not withheld on unemployment compensation checks, so people should be aware of that, he warned.

There is a first-time homebuyer’s tax credit of up to $8,000 for, well, first-time homebuyers who bought their homes on or before April 30, 2010, or who entered into a binding contract and settled on a property before June 30, said Dupree.

Those who have owned a house for some time, but decide to buy a new home, can get tax credits: up to $6,500 if they have owned and used the same home as their principal residence for at least five consecutive years, he said. Also, people who bought certain types of new vehicles in 2009 can deduct state and local sales taxes and excise taxes for them for up to $49,500 of the purchase price.

Finally, those who cannot file their taxes on time can apply for a six-month extension, postponing the deadline until Oct. 15. But it does not extend the due date of payment for those who owe the IRS money, said Dupree.