Income Tax Time is Here

It's only February, but "early birds" already are getting their state and federal income tax returns prepared.

The good news for this year is, Michiganders have a couple of extra days to file their income taxes this year, and there aren’t a lot of changes in tax laws. On the other hand, the state government is changing laws on retirement taxes, charitable contributions and exemptions for next year’s filings, said Beth Yarmak, CPA, EA, of Yarmak & Co. in Hartland and Novi.

The IRS expects to receive more than 144 million individual tax returns this year, with most of those being filed by the April 17 deadline, according to www.irs.gov. The change from April 15 is because April 15 is a Sunday, and Emancipation Day, a holiday in the District of Columbia, is on Monday, April 16. Per federal law, District of Columbia holidays affect tax deadlines as federal holidays do. Thus, there are two extra days to file this year.

Yarmak said Michigan tax law changes, including lower limits for the homestead property tax credit, will affect next year’s tax season.

As a result of the changes, taxpayers could see lower refunds next year, she said. Or, they could find they owe the state some taxes in 2013.

As some people are getting a jump start on the 2012 season, Yarmak said, from experience, those who know they will receive a large refund are some of the first to file their taxes, she said. And, people who know they might owe quite a bit of money also are getting their taxes prepared.

The earlier taxpayers file, the better, Yarmak said. If there’s a balance due, one knows ahead of time.

Yarmak & Co. staff will tell clients if they haven't filed by April 10, they might need to ask for an extension, she said.

Taxpayers asking for an extension will have until Oct. 15 to file their tax returns, the IRS states in its Jan. 12 press release on filing deadlines.

Having a professional prepare income tax returns is an advantage that costs about the same as buying a “tax-in-a-box” computer software program at a discount store, Yarmak said. The fee at Yarmak & Co. for a standard income tax return, with a Michigan resident claiming a homeowner’s deduction, is $185. The fee for a non-homeowner with a W-2 form can be lower, she said.

A tax preparer can help people take advantage of tax laws that most benefit them. And, “if there are errors on your tax return, you can’t get Turbo Tax to go to the IRS for you,” she said. “We stand behind every return we do when it’s filed. If there are issues, we deal with the IRS."

Taxpayers should bring the documents they’ve been receiving by mail to their tax appointment. If one is going to a new tax preparer, he or she should bring the previous year’s tax returns, Yarmak said. In addition, if someone has bought, sold or refinanced a house, the documents from the closing could be of value for tax filing purposes. Also bring any college expense forms. For schoolteachers, bring receipts for classroom expenses that weren’t reimbursed.

Other items to bring are bank statements showing any interest income for the year, mortgage statements showing interest paid and 1099 income forms (www.ehow.com).

There are ways to file tax returns electronically. Last year, 79 percent of taxpayers, 106 million people, used IRS e-file (www.irs.gov). In addition, the IRS sends refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems. Some refunds can be issued in as little as 10 days.

Michigan (www.Michigan.gov/taxes) also encourages electronic tax filing. According to the state treasury, more than two-thirds (over 3.5 million) of Michigan taxpayers used e-file last year. E-filed returns cost 83 percent less to process than paper ones.

State taxpayers using the e-file method can check on the status of their tax refunds, 14 days after filing.

More online resources are available at the state’s website.

The IRS also offers online tax assistance at its website.

Taxtime tips

1. Gather all of the documents you need to prepare your taxes — receipts, cancelled checks, bank statements and anything else you need to support income and deductions you are claiming.

2. The IRS' Free File has brand-name tax software or online fillable forms, available at www.irs.gov. If you made $57,000 or less, you qualify to use free tax software offered through a private-public partnership with manufacturers.　If you made more or are comfortable preparing your own tax return, there's Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile for options.

3.  Many tax preparers are now required to use the IRS' e-file. If someone owes taxes, they have payment options to file immediately and pay by the tax deadline.

4. There are many options for filing tax returns. You can do your own taxes or visit a professional tax preparer. Some people might be eligible for free face-to-face help at a volunteer site. Give yourself time to check out all the options and find the one works best for you.

5. Don’t hurry. It's easy to make a mistake when rushing to get something completed. And mistakes slow down the processing of your tax return. Be sure to double check all the Social Security numbers and math calculations on your return, since these are the most common errors.

Source: http://www.irs.gov/newsroom/article/0,,id=251881,00.html