October 15 Tax Extension Deadline

Tick-Tock, The Deadline Approaches
Tick-Tock, The Deadline Approaches

The deadline to submit 2013 tax returns to the IRS for taxpayers who elected to file extensions is Wednesday, October 15th.  Failure to do so may result in the penalties and interest assessed on due taxes.  Please note, that if you did not file your taxes yet, and did not file for an extension, your taxes were due on April 15th and you are already accruing penalties and interest on any taxes due.

If you need assistance filing your tax return (whether on extension or not), please contact an R&G Brenner tax professional as soon as possible in order to meet the deadline.

What Happens If You Don’t File Your Taxes?

Overdue Taxes Will Come Back To Haunt You
Overdue Taxes Will Come Back To Haunt You

The only certainties in life are death and taxes, as the saying goes. Taxes are an annual event that, however unpleasant, we all have to deal with. It may interest you to know that according to the Internal Revenue Service (IRS), an estimated 239.3 million tax returns were filed in 2012 by individuals and businesses in the United States. That amount exceeded by a little more than 1% the number of returns that were filed in 2011, and by 2018 that number is projected to grow by almost 6% to 253.5 million tax filings.

What about those individuals who do not file a regular tax return? More importantly, what would be your fate if you did not pay your taxes in a timely manner? Below are some of the potential consequences that you may face for failing to file or pay your taxes in a timely manner.

Failure to File Penalty

Whether you owe taxes or expect a refund for a given tax year, it is important to provide the IRS with an informational tax return on or before April 15th of every year. When you miss the April 15th deadline you are subject to a penalty of 5% of the amount that you owe for each month you do not file. The penalty for failure to file can grow to 25% of the total unpaid amount.  If you file a return 60 days after the due date of April 15th, you will be subject to a penalty of $135 or 100% of the unpaid tax liability, whichever is greater. This applies to both those expecting a refund and those who have taxes due.

Failure to Pay Penalty

In addition to the failure to file penalty that you face for missing the filing deadline, you are subject to a failure to pay penalty of half of 1% of the unpaid balance. This amount is assessed each month that your taxes go unpaid and is capped at 25% of the unpaid amount. Generally the failure to file penalty is higher than the failure to pay penalty. Filing a tax extension (Form 4868) on or before April 15th and paying some or up to 90% of the amount owed, as well as paying the balance in full by the extension deadline (typically 6 months or by October 15th), will help you avoid the failure to file and failure to pay penalties.

Loss of a Tax Refund

If you are owed a refund from the Federal government, filing a tax return by the deadline is the only way for you to ensure that the money will be returned to you in a timely manner. The IRS can hold a taxpayer’s refund for up to 3 years. After this time your refund is treated as a “gift” to the government and will remain in the treasury. This means that your failure to file could result in a generous donation of your tax refund to the federal government to do with as they please.  Don’t let that happen…

Loss of Wages, Assets or Arrest

If you do not pay your taxes, the IRS will eventually come after you directly. There initial contact will be a letter informing you of your outstanding liability (or failure to file) with an opportunity to file an amended return. Ignoring this opportunity will result in a possible wage garnishment and even seizure of your assets, such as your home or car. If the amount of your tax liability is deemed by the IRS to be excessive you may be arrested and charged with tax evasion, subject to a fine of up to $100,000 and up to 5 years in prison. 

Suspension Of Drivers License

Some states like New York are suspending the drivers licenses and/0r disallowing the renewal of licenses for those that have not paid their taxes.  This recently went into effect in 2013.  Expect more and more states (especially those with budget issues) to follow suit.

Not filing your taxes, or failing to pay them, is a serious concern and should not be taken lightly. If you need help filing your taxes, or you’ve missed a deadline and need to know what your next steps should be, don’t hesitate to contact an R&G Brenner professional tax preparer.

What If I Forgot To Include Information On My Taxes?

Forgot Something On Your Tax Return?  Don't Worry!
Forgot Something On Your Tax Return? Don’t Worry!

So, you worked hours on your tax return, gathered your documents, filed on time and you are now awaiting your tax refund with eager anticipation. All is well until that moment of mild terror when you realize you forgot to include a vital document or deduction on your taxes. Don’t panic: all is not lost. There are ways to include missed information on your taxes, even if you’ve already filed them.

File an Amended Tax Return

When you’ve omitted information on your return, the IRS allows you to file an Amended U.S. Individual Income Tax Return called Form 1040X. However, you can’t e-file amended returns; they’ll have to be submitted it in paper form which increases the wait time by many weeks for any potential additional refunds.

Reasons to File

There are lots of reasons you might need to file an amended tax return, but there are some things that don’t necessitate one. You’ll need to file a 1040X form if you have experienced a change in your filing status, income, credits or deductions. But you do not have to file if you caught a math error after the fact. The IRS is pretty good about catching these types of mistakes and usually adjust these automatically for you. For example, If you forgot to attach the proper tax forms and a W2 is missing,  there’s no need to file this amended form. You should get a request from the IRS requesting any missing items. The IRS can easily find income that you may have omitted from your tax return, but sometimes it can take a very long time for the IRS to notify you.  That means if you made an error where you underpaid your taxes in some manner, you will accrue penalties and interest until your tax liability is paid in full.  It could pay for you to file an amended return to minimize penalties & interests.  On the other hand,  the IRS isn’t as well-equipped for finding missing credits or deductions that you may have overlooked, and which could increase your refund.  In this case, don’t wait until you get a letter from the IRS looking for more information. Instead, be proactive and file the amended return.  After all it’s your money and the IRS does NOT have to pay you interest for holding onto your well deserved refunds.

Rules

You have three years from the original filing date to submit Form 1040X, or two years from the date of tax payment.   You’ll need to submit a separate 1040X form for each tax return you’re amending and mail them separately to the IRS. Also, don’t assume they are all being mailed to the same mailing address.  There are usually separate processing PO Boxes for each tax year you are amending.  If you plan on claiming more of a refund, you must wait until you get your original refund in the mail or via direct deposit before filing the 1040X. Again, keep in mind that amended refunds take awhile to process, so it could take up to 12 weeks before you receive anything. If you owe more taxes as a result of the amended return, pay what you owe right away to avoid fees and penalties from piling up, as the IRS will begin charging you based on the due date of your original tax return.

Track Your Status

Similar to tracking your original refund status, the IRS has a Where’s My Amended Return? tool (you can also check R&G Brenner’s Where’s My Refund page as we include State Refund links as well) that you can use to track your amended return’s status. Alternatively, you can call the IRS at 866-464-2050. Have your taxpayer identification number or social security number handy, along with your date of birth and zip code.

If you forgot to include some vital information on your tax return, follow the steps above to make sure you pay all the right taxes and get your full refund.  Or, simply contact an experience R&G Brenner tax professional today, and we’d be happy to assist you.

What Are the Next Steps If I Missed the April 15th Deadline?

Did You Miss The Deadline?
Did You Miss The Deadline?

Tax season is always a stressful time of the year.  Regardless if someone files themselves or hires a professional, nobody relishes the thought of having to file their taxes. Most people manage to get their taxes filed before the deadline, but there are always some who cannot get their taxes filed on time and don’t file an extension. 

The April 15th deadline for filing taxes for the 2013 tax year has passed. This sounds serious, but don’t panic. While you may incur some penalties for failing to file on time, acting quickly can help ensure that they won’t be too severe. If you have extenuating circumstances that prevented you from filing your taxes on time, you may even be able to get your penalties abated. Here’s what you need to know for filing your taxes after the deadline:

Your Refund Will Be Unaffected

If you are getting a refund, don’t worry, it will be perfectly safe. Unclaimed refunds can only be forfeited after three years, but the IRS won’t impose any penalties on your refund if you file late. The worst that can happen is that you will receive a refund later than you would have if you had made the deadline, and the IRS does not pay interest.  There is nothing gained from having the IRS hold onto your refund, so if you are due a refund, file a tax return as soon as possible.

Penalties for Filing and Paying Late

The penalty for filing your taxes after the deadline is five percent of the unpaid tax bill for every month your tax return is late. These fines and penalties will not exceed 25 percent of your total bill, however. The penalty for failing to pay any taxes that you may owe is one-half of one percent of the unpaid balance.

If you owe taxes that you cannot pay, you should still file as soon as possible, and set up a payment plan to pay off what you owe in installments to minimize penalties. You can also pay a partial amount when you file to lower the balance—it’s a good idea to pay as much as you can. The important thing is that you make an effort and do your best to stick to any payment plan that you set up. Keep in mind that you will most likely need to fill out additional paperwork if you owe more than $50,000 and wish to pay in installments. The IRS will want to see financial statements to ensure that your payment plan is realistic.

Filing an Extension

While it is too late now to request an extension, for future reference you can receive a six-month extension of the tax deadline by filling out Form 4868. This will give you more time to file your taxes, but it won’t give you more time to pay any taxes that you may still owe. Still, it can help you avoid any penalties that come from filing late.

Whatever you do, you should never decide not to file or pay your taxes. You might be afraid of the penalties that come from missing the April 15 deadline, but the penalties for not filing at all are much worse. The most important thing is that you file, even if you file much later than the deadline. Your chances of getting into real legal or financial trouble become much greater the longer you wait to pay what you owe to the IRS.

Volunteer IRS Sites Prepare 50% of Tax Returns Incorrectly

VITA Sites Still Preparing Tax Returns Incorrectly
VITA Sites Still Preparing Tax Returns Incorrectly

In a follow up to a report by the Treasury Inspector General for Tax Administration (TIGTA), free income tax preparation sites have made no significant gains in increasing the accuracy of the tax returns they prepare. The new report states that Volunteer Income Tax Assistance sites (VITA) who prepare income tax returns for low/moderate-income, elderly, disabled and limited-English-proficient taxpayers are still filing approximately 50% of tax returns incorrectly!

Of the 39 tax returns prepared for auditors during the 2013 filing season, 20 of them (or 51 percent) were prepared correctly, while 19 (or 49 percent) were prepared incorrectly. That represents a two-percentage-point increase over the 49 percent accuracy rate for the same number of returns in the 2012 filing season. The 19 incorrect tax returns resulted from incorrect application of the tax law, insufficient requests for information during the intake and interview process, or lack of adherence to quality review requirements.

While this is a small sample of the 3.3 Million tax returns prepared by over 90,000 volunteers across the country, it is still nonetheless troubling that TIGTA continues to find these types of accuracy related problems 2 years later due to “incorrect application of the tax law, insufficient requests for information during the intake and interview process, or lack of adherence to quality review requirements”.  TIGTA recommends–and the IRS agrees–that all volunteer instructors, return preparers, quality reviewers and site coordinators complete intake/interview and quality review training annually.  I am not sure what is more head scratching: that so many returns are being prepared incorrectly, or that these volunteers have receiving little to no training over the past two years since this problem came to light.

The VITA system is supposed to be helping those that are the neediest as a) they cannot afford professional income tax preparation and b) they need their refunds essentially to live.  In theory this is a vital service that needs to continue.  In practice, how do you motivate volunteers to devote more of their time (and possibly money) for training & licensing to put out a better product, yet receive no compensation? Furthermore, it sort of defeats the purpose of “helping” these taxpayers if their return is prepared incorrectly which potentially opens them up to delayed refunds, audits and penalties/interest. The old adage “you get what you pay for’ apparently applies here.

If you have had your return prepared at a VITA site, please let us know about your experience in the comments section below.  Plus, if you’ve had your return prepared in the past 3 years at a VITA site or any other tax establishment, and would like it checked for accuracy, contact an R&G Brenner professional today for a no obligation consultation, and we will review them for FREE!

Source: Accounting Today

October 15th Extension Deadline

In spite of the government shutdown that has shuttered many departments in the IRS, the deadline to file tax year 2012 returns remains October 15th. That means, even though the IRS may not be able to process your return, you still have to pay your taxes on time or risk penalties and interest for failing to file.  The IRS has issued the following tips:

  • Taxpayers are encouraged to file their returns electronically using IRS e-file or the Free File system to reduce the chance of errors.
  • Taxpayers can file their tax returns electronically or on paper. Payments accompanying paper and e-filed tax returns will be accepted and processed as the IRS receives them. Tax refunds will not be issued until normal government operations resume.
  • IRS operations are limited during the appropriations lapse, with live assistors on the phones and at Taxpayer Assistance Centers unavailable. However, www.IRS.gov and most automated toll-free telephone applications remain operational.
  • Tax software companies, tax practitioners and Free File remain available to assist with taxes during this period.

Many taxpayers–especially living in coastal NY & NJ–have not filed yet due to the destruction inflicted by Hurricane Sandy on property and tax records.  If you need assistance filing your tax returns, an R&G Brenner tax professional can help.
 

Tax Tips If You Are Accused of Tax Fraud

 

Tips If You Are Accused Of Tax Fraud
Tips If You Are Accused Of Tax Fraud

Stephen J. Dunn a contributor for Forbes magazine offers some key tips for taxpayers who are accused of filing fraudulent tax returns. Interestingly, according to Dunn, the best evidence the IRS obtains in support of a fraud case comes from the taxpayer themselves, disgruntled employees and even family members.  

In the case of the taxpayer implicating him/herself, the IRS usually sends field agents to visit the taxpayer.  It is at that meeting the IRS will ask pressing and pointed questions concerning the alleged fraud.  The taxpayer is NOT required to answer any of their questions at this initial meeting, nor should they unless in the presence of appropriate counsel.  Furthermore, many former employees who perceive they were slighted are all too happy to provide the IRS with evidence of their employer’s fraud.  Estranged spouses going through a divorce may also use the threat of reporting their counterpart to the IRS in the hopes of extracting a more favorable settlement.

When one considers legal fees, repayment of back taxes, penalties, the prospect of jail time–and not to mention the copious amount of personal time expended–the risk simply is not worth the reward as the capital expended defending oneself will almost always exceed the capital that was not reported. The following is a list of Dunn’s tips:

Retain competent counsel.  I am talking about an attorney experienced in representing taxpayers in criminal tax cases.  Not a criminal generalist attorney, or a tax generalist.  For God sakes not an accountant.  Accountants are profoundly ill-equipped to represent taxpayers in criminal tax investigations.  Moreover, there is no accountant-client privilege in Federal court.  When the IRS investigates a criminal tax case, one of the first things it does is subpoena the taxpayer’s accountant and compel him to tell everything he knows about the case, and produce his documents concerning the taxpayer.  Concerned about complicity in the alleged tax fraud, the accountant may be anxious to talk with Federal prosecutors, in return for immunity.

Don’t talk with Federal agents, or with anyone who mysteriously appears at the taxpayer’s business.  Tax crimes are specific intent offenses—the IRS must prove beyond a reasonable doubt that the taxpayer knew that his tax return materially understated his tax.   One of the best ways for the government to prove  is by the taxpayer’s own admissions.  IRS agents make detailed notes of an interview of a taxpayer, and often embellish the taxpayer’s statements, or misquote the taxpayer.  The taxpayer is better off leaving communication with Federal agents to his counsel.

Don’t panic.  The IRS has a heavy burden.  The more complicated the facts and the law, the tougher it is to prove that the tax returns materially understated tax, or that the taxpayer knew it. This too shall pass.

Consider  a voluntary disclosure.  If the facts clearly establish a material underreporting of tax, the taxpayer should consider making a voluntary disclosure.  This decision should not be delayed, as the IRS will accept a voluntary disclosure only as long as the IRS has not opened an investigation of the tax returns.  The IRS no longer recognizes “quiet” voluntary disclosures.  Taxpayer’s counsel makes an initial inquiry of IRS CID as to whether there is a tax fraud investigation afoot at to the taxpayer.  If the answer is negative, then taxpayer’s counsel may submit a voluntary disclosure for the taxpayer, under guidelines prescribed by IRS.  IRS CID will then send taxpayer’s counsel a letter stating that if the taxpayer does what the IRS requires, including filing appropriate amended tax returns and paying the tax due thereon, the taxpayer will not be prosecuted.  The IRS will conduct a civil audit of the amended tax returns.

Don’t ignore the problem, but rationally analyze options with counsel.

To read Dunn’s complete article, click here.

What To Expect If You Filed Your Taxes Late

What Happens If I Filed Late?

This year, your federal income tax return was due on Tuesday, April 17. That’s because the usual deadline, April 15, fell on a Sunday, and a federal holiday, Emancipation Day, fell on April 16. If you didn’t file your return on time despite the extra two days, here’s what to expect. 

Interest and Penalties
When you file and pay your taxes late, the Internal Revenue Service (IRS) will charge you interest, compounded daily, on your unpaid tax. Interest accrues from the April 17 deadline until the date when you actually pay. The IRS’s annual interest rate on late payments is the federal short-term rate (currently 0%) plus 3%. The rate changes quarterly; taxpayers can find current rates at the IRS’s news release web page.

In addition to interest, you’ll be responsible for a late payment penalty of 0.5% plus a late filing penalty of 4.5%. Both penalties are charged on the amount of tax you owe for each month or partial month that you don’t pay your tax bill. The penalty maxes out at 47.5% – that’s 22.5% for filing late and 25% for paying late. The late filing penalty increases to 15% per month with a maximum of 75% for fraudulent failure to file.

The IRS will reduce or even eliminate the late filing and payment penalties if you can show “reasonable cause,” but the IRS may not interpret those words in the same way you would. Also, members of the armed forces who are currently serving in combat zones may qualify for an exception to the filing and payment deadlines. So will some taxpayers affected by recent natural disasters.

The good news is that you don’t have to worry about going to jail for filing or paying late or for making a mistake on your return. The IRS says it reserves criminal prosecution for “flagrant cases involving criminal violations of tax laws.”

Willful Neglect
If you don’t file a return, the IRS may prepare a return for you using the information it has about your income from W2s, 1099s and other forms it collects from third parties like your employer and financial institutions. An IRS-prepared return is unlikely to give you credit for all the deductions and exemptions you’re allowed, so an IRS-prepared return (also called a substitute return) is likely to result in your owing more tax than you were actually required to pay. If the IRS does file a substitute return, you’ll have the opportunity to correct it and receive the exemptions, credits and deductions you’re owed if you file your own return.

If you intentionally don’t pay your taxes or make any effort to pay them, the IRS can force you to pay them. It can levy your bank accounts, garnish your wages and/or seize your assets. It can also file liens against your assets, including your home. If you aren’t intentionally evading your tax liability but you can’t pay, your best bet is to file on time and work out a repayment plan with the IRS. Under such a plan, the IRS may lower your late payment penalty to 0.25% per month, and you won’t owe the late filing penalty of 4.5% per month.

What Is Considered on Time?
If you file your tax return electronically, your return transmission will have an electronic postmark. This electronic postmark determines whether you filed on time.

The IRS considers paper returns to be filed on time if they are “mailed in an envelope that is properly addressed, has enough postage and is postmarked by the due date.” If you use a private delivery service such as DHL, UPS or FedEx to send your tax return, the postmark date is considered to be “the date the private delivery service records in its database or marks on the mailing label.”

Tax Return Extensions
If you need more time to prepare your return, filing an automatic extension request is simple and straightforward. Filing form 4868 gives you an extra six months to prepare your return. Be aware that if you file an automatic extension, your filing deadline becomes October 15, not October 17. This extension does not, however, extend the amount of time you have to pay any tax you owe. 

If you need more time to pay and you owe $50,000 or less in combined taxes, penalties and interest, try using the IRS’s online payment agreement to automatically set up a payment plan. You can do this even before you receive any notices from the IRS. Another option is to request a payment agreement by filing form 9465-FS. If you’re having trouble paying your taxes because you lost your job or your self-employment income has declined by 25% or more, you might qualify for penalty relief and a six-month payment extension under the IRS’s Fresh Start program.

The Bottom Line
In the future, if you know you won’t be able to file your return on time, file an automatic extension using form 4868. You can do this online through the Free File link at IRS.gov, through a tax software program or through a professional R&G Brenner tax preparer. The form asks you to estimate your tax liability and pay what you think you will owe. Even if your estimate turns out to be incorrect, it could reduce any late payment penalties you might owe, and you won’t be subject to late filing penalties.

Source: Investopedia

What To Do If You Can’t Pay Your Taxes

If You Can't Pay IRS, Don't Panic
If You Can't Pay IRS, Don't Panic

It’s one of the worst tax time scenarios: You discover while doing your taxes — or you just know without even doing them —that you owe taxes, and you don’t have the cash. What should you do?

You may be tempted to ignore the problem. Don’t do it. The worst thing you can do is put off filing your return because you’re afraid of the bill. The Internal Revenue Service (IRS) penalties for not filing are more punitive than the ones for not paying.

The failure-to-file penalty runs to 5.0 percent a month that your return is late, up to 25 percent, with a minimum penalty of $135. The failure-to-pay penalty is just a fraction of that, at 0.5 percent a month of the unpaid tax at April 17, and even that is cut in half for taxpayers who set up a formal installment plan with the IRS. Either way, you’ll also owe interest, currently at a modest 3.0 percent a year.

Consider the case of a taxpayer who owes $2,000 and won’t have the money until the end of June. If she files a return or an extension by April 17, the total penalties and interest due would be just $43…But if she puts off filing until June 30, and pays then, those penalties and interest would multiply to $314…The longer this taxpayer waits to file, the more those fees would balloon.

“That’s a lot of money for late filing,” says Allison Shipley, a partner at PricewaterhouseCoopers in Miami. “And, in my experience with clients who have had a difference with the IRS, they tend to be more lenient if you’ve always filed your returns on time.”

So the first step to consider if you’re not ready to file is the simplest: File for a six-month extension, using Form 4868. As long as you’ve paid 90 percent of the taxes you owe by April 17, you will not owe the late-payment penalty. You will, however, still owe interest on any unpaid taxes.

If you have the cash, but have run out of time to deal with the paperwork, you can send in an estimated amount to avoid some or all of that interest. Similarly, if you owe taxes, but can’t pay all that you owe, you could send in a partial payment to cut the interest and penalties due.

HARDSHIP BREAKS

The IRS does offer a few hardship breaks for cash-poor filers. The big one in effect this year is called Fresh Start, and lets those who were unemployed request a six-month extension to pay this year’s tax bill without being charged any penalties.

You would qualify if you did not have a job for 30 straight days in 2011 or in 2012 until April 17, or if you were self-employed and saw your income drop by at least 25 percent in 2011 due to the economy. You would file Form 1127, and automatically get until October 15 to pay. While you would get out of the penalties for six months, you would still owe interest.

Those who have survived a natural disaster or who are on active military duty may also qualify for penalty-free extensions for varying amounts of time.

FINDING THE CASH

If you are not in one of these special categories, and you owe more than you have, you may want to weigh your various options for finding the money you need. You could: (1) put your tax bill on your credit card; (2) Use a home-equity line of credit; (3) just pay late and swallow the penalties and interest; or (4) ask the IRS to accept a formal installment agreement.

While the standard advice is to pay the IRS first, that may not make sense this year. IRS rates are so low, compared to credit card rates, that it may make more sense to deal with the tax agency directly. A tax installment payment plan, even with penalties, costs around 6.0 percent a year.

“This is an interesting time for strategy because of those low rates,” says Larry McKoy, a certified public accountant at Dickson Hughes Goodman in Glen Allen, Virginia.

Not only is the average rate on credit cards currently 15 percent, according to CreditCard.com, but when you pay taxes on a credit card you also have to pay an added “convenience fee” that could add as much as 2.0 percent to your transaction. That’s because the IRS is prohibited from paying the interchange fees most retailers pay on card transactions.

If you have access to a home equity line of credit, it may be worth tapping that because the rate is likely lower and you do not have to worry about those taxes hanging over your head, says Gregg Wind, a certified public account with Wind & Stern in Los Angeles.

INSTALLMENT PLAN COMPEXITITES

There’s no hard-and-fast rule for when to do an installment plan, but the higher the amount [you] owe and the longer it will take you to pay it, the better off you are to request one rather than simply paying late. An installment plan will put your payments on a monthly schedule and cut your penalty on unpaid taxes in half, to 0.25 percent.

To set one up, you will file Form 9465 and pay an application fee of between $43 and $105, depending on your income level and whether you are willing to pay through automatic deductions from your checking account or paycheck…

The IRS can reject an installment agreement, but usually does not, unless filers owe an astronomical sum or request a overly lengthy payment period. In fact, acceptance is guaranteed if you owe less than $10,000, request a payment period of three years or less, you have paid all your taxes for the last five years and the “the IRS determines that you cannot pay the tax owed in full when it is due,” according to the IRS’s rules on installment agreements.

For larger tax liabilities, the process gets more complex, though there is a streamlined application process for those who owe no more than $50,000. Taxpayers who owe larger amounts must file Form 9465-FS.

“If it’s under $50,000 you are not going to be asked to file a lot of financial information,” says Wind. “A lot of people are overwhelmed by the thought of compiling a lot of financial information, but they don’t need to be.”

Better to fill out a few extra forms than get stuck paying 5 percent a month, every month, for not filing them.

If you need assistance or advice setting up a payment plan or filing any of the tax forms above, contact an R&G Brenner progressional today.

Source: Reuters

The True Cost of Do-It-Yourself Taxes

The Average DIY Taxpayer Lost b/w $347-$841

Fellow tax professional Dave Ramsey recently preformed a survey of 2000 taxpayers; about half of who prepared their own returns, and the other half who had them prepared professionally. This is what he found:

When you use software to file your income taxes, there’s a moment, an instant just before the point of no return, when you silently wonder—what if?

What if I didn’t enter the numbers correctly?
What if I miscalculated?
What if I missed a deduction or credit?
What if I claimed a deduction or credit I’m not eligible for?

All that uncertainty is one of the downsides of self-filing. Other disadvantages can hit you where it hurts most—your wallet.

Reduced Refund

Since most folks aren’t tax experts, it’s easy for them to miss deductions or credits when they self-file. They are also more likely to take the standard deduction instead of itemizing their expenses. Either of these mistakes could lower their refund.

Take a look at these numbers from our recent survey of 2,000 of Dave’s Facebook fans.

  • Self-filers got an average refund of just less than $1,500.
  • But folks who had their returns professionally prepared had an average refund of nearly $1,800!
  • Procrastinating self-filers, those who filed their returns during April, got an average refund of more than $1,800, while those who used a pro got an average $2,600 refund!

Those folks potentially lost hundreds of dollars by trying to save a buck and doing their taxes themselves. It doesn’t seem like such a smart choice now, does it?

Magnified Mistakes

The cost of DIY tax prep isn’t limited to the size of your refund. Your mistakes can also cost you in the form of penalties and interest.

The IRS checks every return for a signature (manual or electronic) and math errors and cross-checks all sources of income that are reported via W2s, 1099s, etc. So if you fail to report any income or enter the wrong number in the wrong column, the IRS will call you on it.

And if it turns out you owe taxes, by the time the IRS notifies you, penalties and interest will have already inflated that amount. You’ll be charged a penalty for paying late and you’ll be charged interest from the date the tax was due until the date of payment, and it compounds daily.

By working with a tax professional, you’ll not only have confidence that your taxes will be done right the first time, you’ll also have peace of mind that your tax professional will be there to help you if the IRS has questions about your return. File with [consumer] tax software, and you’re on your own if the IRS comes knocking…

The evidence is clear; trying to save pennies with DIY tax software can cost you thousands of dollars in unclaimed refunds, penalties and/or interest.  And one of the most important losses is your time.  Remember, even if you are using a “free” DIY tax service, you still have to take the time to for research, record keeping, learning the program and double checking all the figures.   It obvious that receiving a larger well deserved refund is more valuable than smaller refund.   However, the old adage that “time is more valuable than money” couldn’t be more true especially when the IRS reports that it can cost a taxpayer up to 32 hours simply to prepare an annual tax return!

So, save yourself time, money & the stress of preparing your income tax return yourself and contact an R&G Brenner tax professional today.  We offer a free consultation for your current year tax returns as well as your 3 previous years returns.  Plus, you can qualify for many promotions that can save you money & even make you money.

Source: daveramsey.com