Tax season doesn't have to be taxing
January 12, 2011
As the new year begins, the time to address income taxes looms just ahead and sends a signal of dread to many Americans. The thought of getting out the checkbook and writing Uncle Sam — or Uncle Mitch — a check for unpaid taxes sends shivers down the spine of taxpayers everywhere.
But taxes are necessary, just as roads, schools, law enforcement, libraries, courthouses and even the military — all supported by taxes — are necessary parts of everyday life in America.
This year, like most years, taxpayers will see a few changes in the tax system that could affect them.
"The deadline for filing taxes is usually April 15," said Jim Taylor, of Taylor Accounting in Marengo. "This year, the deadline will be Monday, April 18, due to a holiday falling on a certain day. A short form can be filed anytime after Jan. 14, but a long form can't be filed until Feb. 15."
And this year, Taylor said, there will be few tax preparers offering rapid refund options.
"And there will be no IRS acknowledgment of receiving requests for rapid refunds," Taylor said. "So, if you apply, you won't have any idea if that application has even been received. And this year, there is a $1,500 limit on the rapid refund option. No larger amounts will be processed. Also this year, there will be less Social Security taxes withheld from paychecks across the board. The new percentage withheld will be 5.65 percent."
Taylor said that a person can still get a six-month extension on filing taxes, moving the deadline to Oct. 17, but getting that extension will require the person to pay an amount equal to 90 percent of last year's taxes by April 15.
"In other words, you can extend the deadline for filing, but you have to pay a large percentage of what you may owe in April," Taylor added. "And any tax form that is late will cost the taxpayer $5 a day for every day it is late, up to 50 days, which will be $250 if you're two months late."
Other tax changes for individuals include:
•A deduction for new motor vehicle taxes. You can deduct state or local sales or excise taxes in 2010 for the purchase of any new motor vehicle after February 2009 and before Jan. 1, 2010.
•Health coverage legislation enacted this year includes a small business health care tax credit to help them and small tax-exempt organizations afford the cost of covering their workers.
•The earned income credit amounts have increased for 2010.
•The standard deductions will be increased for most taxpayers. The increased amounts are reflected by the status you file. For example, married couples filing jointly will be able to take a standard deduction of $11,400. Singles and married couples filing separately can take a standard deduction of $5,700.
•Individuals can contribute more in their 401K retirement account and IRA account before having to pay taxes on it.
•The mileage deduction has decreased by 2.5 cents. The standard rate for charitable use remains the same.
•The gift tax exclusion has increased by $1,000.
•The earned income credit has increased more than $2,000 from 2008.
•The limit on itemized deductions expired in 2010.
•The maximum amount of wages subject to the Social Security tax and Medicare tax remains unchanged.
"And 'Making Work Pay' is still available to everyone who works," Taylor said. "You actually file for this on your tax returns and the amount is $400 for each working person.
"And now, businesses can no longer just take their Social Security and federal taxes to the bank. They now have to file electronically. They want everyone to do the electronic thing these days."
Anyone needing more information can contact Taylor at 365-9393 or go online to in.gov/dor.