More On Tax Planningfrom The Advisor's Professional Library
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- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
“This year people are coming in a week later than normal,” to file their taxes, says fee-only financial planner Bernard Kiely of Kiely Capital Management in Morristown, N.J. Also a CPA, Kiely has been providing planning and income-tax services for individuals for more than 25 years.
Why? Kiely told AdvisorOne in an interview late Thursday that he thinks it’s because the filing deadline was postponed from the usual April 15 deadline—a Friday, until April 18—the next business day. Washington DC government offices are closed for a holiday on April 15th this year.
The IRS has received 89,713,000 individual income tax returns in 2011, as of April 2. That’s down -0.3% from the 89,970,000 returns received one year ago.
“One retired couple,” whose returns Kiely’s prepared for more than 20 years “have not even come in yet,” he added. One thing that’s new this year is that all returns filed by a paid preparer must be filed electronically, Kiely notes.
The e-filing is good because, he argues, the IRS used to have to “keypunch a lot of information and they made a lot of mistakes.” For instance, “they would put a long-term capital gain in as short term. The tax is higher,” on a short-term gain, so the IRS would let the taxpayer know they owed more tax and Kiely would have to set them straight.
Now that the returns are e-filed, though, “people are confused about of how to pay. The return is separate from payment now,” Kiely explains.
One of Kiely’s client’s returns was rejected because “their daughter’s taxpayer ID number appeared on another return. Her boyfriend claimed her as a dependent.” Another couple’s return was “rejected when their daughter got an apartment and filed her own taxes,” and her taxpayer ID appeared on both returns. When Kiely tried to file an amended return, he found he could not do that electronically. So there are a few bugs to work out but they appear to be minor.
More Audits for E-filers?
There was an urban legend circulating a year or two ago as e-filing got popular but wasn’t mandatory for preparers: more audits of those who e-file. But Kiely says “audits are really down in the last three years. They get all the data—they don’t have to keypunch anything.”
Meanwhile, the IRS has received a total of 76,895,000 e-filed returns this year, up 7.4% from last year. Tax preparers filed 48,861,000 of those returns, up6.3% from a year ago. Individuals e-filed
28,034,000 returns, up 9.3% from last year The IRS has issued 75,227,000 refunds, up 1.5% from last year, for a total of $219.785 billion, making the average refund $2,922.
Going New Media
The IRS has gone new media this year, offering Tax Tips on video and posting them on You Tube. While they may not draw the same viewership as, say, Justin Bieber’s 516,361,036 views, or “Charlie Bit my Finger” at 301,550,672 views, well, give them time. The most popular IRS video is “Tax Tips: Message for Tax Preparers,” with more than 37,500 views, followed by “Tax Tips: Owe taxes But Can’t Pay?” with more than 31,300 hits.
Taxpayers can check the status of their refunds with the new IRS2Go mobile phone app, and follow the IRS on Twitter at @IRSnews.
Need an Installment Plan?
This year, the IRS announced several ways it was working with taxpayers who owe more than they can pay at one time. For those who owe $25,000 or less, there is the “Online Payment Agreement (OPA);” and “streamlined Offer in Compromise program, for “taxpayers with annual incomes of up to $100,000 and tax liabilities up to $50,000.”
Who Doesn’t Have to File
Is there anyone who doesn’t have to file a return or extension? The one group that can ignore the April 18 filing date are those on active military duty who have “at least 180 days after the service member leaves the combat zone,” the IRS notes on its web site.
The Last Resort
If your client absolutely positively cannot file their return by midnight, April 18, they can punt. That’s right, as long as they send what they owe (so they do have to do the calculation) the IRS will grant an automatic six-month extension, which runs this year until Oct 17th. The IRS expects 10 million requests for an extension this season, which it says is “about the same as last year.” Taxpayers that want to file for extension electronically can do so for free here, via the Service’s” IRS Free File or Free File Fillable Forms.”