The Valdosta Daily Times
Every year, the beginning of March gives us the chance to look back on the first couple months of the new year, to daydream about spring and to finally get around to filing taxes.
With each year comes new tax changes and this year is no different, with many changes geared towards higher-income earners.
With the Bush-era tax cuts expiring, that leaves the top tax rate at 39.6 percent for individuals making $400,000 or couples making $450,000 who file jointly.
There's also an additional Medicare charge for individuals making $200,000 or more and couples making $250,000 or more.
There have also been changes to the Internal Revenue Service itself.
“Speed and efficiency aren't usually the first thing you think of with the IRS,” said Gene Conley, with TC Tax Service, “[but] the IRS accepts a return in about one to two minutes after we transmit it....Now, the payment doesn't come that fast obviously, but the average payment time for refunds this year is about nine days, which is significantly faster than it’s been in previous years.”
Gone are the days of everyone filing paper forms and mailing them in. Now, almost everything the IRS does is electronic, something that greatly expedites the process of processing hundreds of millions of tax returns between January and April each year.
Along with that increased speed comes increased efficiency, and not just in getting out payments. The IRS systems can compare your specific return against others, looking for inconsistencies.
“With the ability to have electronic information, they are able to audit returns in a more automated fashion.”
For example, if Tim's return claims he gave 30 percent of his adjusted gross income to charity, but everyone else in Tim's region gave an average of 10 percent, that might send off a letter to Tim, asking him if he has documentation for his charitable giving.
Or say that Tina is reporting that she has a $100,000 loan at 11.7 percent, and wants to write off the interest, but the bank is reporting that the loan is at 8.7 percent. What was once a long and lengthy process to match up the bank's documentation with Tina's is now a much simpler, electronic affair.
Still, for all the electronic improvements, people still miss claiming tax credits each year, with some estimates putting it at a billion dollars left on the table every year.
“You get a lot of people who, when they go online to file...they'll file the federal and not file the state,” said Terry Conley. “In a lot of cases, they had a refund coming from the state as well, it just wasn't as large.”
And you get students who aren't working while going to school, so they don't file. But, for students taking out student loans, they can claim the entire amount for the year that they borrow, and then interest after that.
Last year saw a rise in tax fraud, with some people going to file only to find someone had fraudulently filed their return.
While the IRS has responded by setting up a new department to handle fraudulent returns, Terry, Gene and Cathy have personally seen a rise of around 10 percent in fraudulent cases.
“When we see that, you can imagine what it is nationwide,” said Cathy.
It's never too early to think about next year. While the changes brought by the Affordable Care Act won't effect this year's tax returns, next year will see a penalty for not having some form of health insurance. While the 2014 penalty will be relatively small in comparison to the average cost of healthcare, it will increase over the next few years to the extent that in 2016, it would essentially be cheaper to have health insurance.The ACA also comes with a set of subsidies to offset the monthly cost of health insurance, with subsidies based off of yearly income and family size.