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Tax clock is tick ... tick ... ticking

March 30, 2013
Weirton Daily Times

STEUBENVILLE - Time is ticking away for millions of Americans who still haven't filed their 2012 taxes.

The Internal Revenue Service expects to process more than 140 million returns this filing season; somewhere between 25 percent to 35 percent of them will go down to the wire, however.

"Don't wait until the last minute," advised Jennifer Jenkins, IRS Field Media Relations agent for Ohio. "But if you do, between now and then make sure you have all your paperwork in one place ... make sure you have your childcare receipts, make a list of any donations you made, get your receipts together so you can add them up. You've got to have your papers in order. When you sit down to do your taxes, you don't want to be distracted and looking for papers that might be difficult to find."

Jenkins said these days, most Americans are opting to file electronically: Not only is e-filing a time-saver, but computer-assisted programs also reduce the risk of error.

Computerized tax prep programs "tend to do a better job on the whole" than the average person can do with a paper return, she said. The software does the calculations and sends up red flags when something doesn't jive.

"We generally recommend electronic filing, simply because the error rate on returns that are computer-assisted is much lower than on paper returns," she said. "It just improves accuracy."

The software also will help taxpayers determine eligibility for often overlooked deductions like the Earned Income Credit, which helps offset the burden of Social Security taxes for low- to moderate-income working individuals and families.

"We believe 80 percent of the people who are eligible to claim EIC do," she said. "But that means 20 percent of the people who are eligible aren't getting it."

Jenkins said a particular individual or family's situation may change from year to year, and someone who may not have been eligible based on their 2011 earnings may be this time around.

Though it's capped out at $6,000 per filer, most people get substantially less than that but, even so, she said it's still a tidy sum.

West Virginia: In 2012, qualified Hancock County residents received on average $2,073 in EIC. Ohio County residents averaged $1,963, and Brooke County residents, an average of $1,874 each.

Ohio: Last year, the average payment to qualified Jefferson County residents was $2,123. The number was slightly less in Carroll County, $2,112, and Harrison County, $1,972.

"Really, it's an incentive for people to work," Jenkins said. "EIC can help people get above the poverty level. It can help them get their car repaired so they can get to work, it can help them purchase an appliance or even make the down payment on a home."

Those who opt to use a paid preparer need to choose wisely, she added. While many paid preparers are tax professionals who stay up to date with changes in the tax code, "there are some who profess to be tax professionals but could really be con artists who'll manipulate numbers and create false documents," she said, adding it's particularly important for taxpayers with complex issues, assets and different types of income, such as self-employment.

"It seems like a good deal until your return is pulled out for an audit and you're told you own a significant amount because it was fraudulent. Then it doesn't seem so good anymore."

Jenkins said taxpayers who choose to use a paid preparer "need to have ownership of their tax return, they need to understand the information on it, make sure it's really complete and accurate."

She said any return can be audited, though the odds increase for those with higher income. The IRS uses a random sampling process to help establish norms, then uses that info to help them flag returns that don't fit the profile.

"Audits are done on under 1 percent of all tax returns that are filed," she said. "And an audit doesn't necessarily mean you're going to owe money; your best defense against an audit is a complete and accurate return."

If you claim expenses for, say, using a home phone or a family car for business, she said you'd better be able to show the examiner phone or mileage logs that document the usage.

"Having phone logs, mileage logs or receipts, those are all very important things," she said. "You need to have the documentation in hand, and if you're entitled to that credit, your documentation will put you into the clear."

Jenkins also referred to what she called the Dirty Dozen Tax Scams for 2013. Heading the list:

ID theft: The IRS has 3,000 people working on identity theft cases, including refund fraud. The agency blocked $20 billion in fraudulent refunds in 2012.

Return preparer fraud: The IRS recommends you only use a preparer who will sign the refund and enter his or her IRS preparer tax ID number.

Phishing: The IRS said it does not initiate contact with taxpayers by e-mailing requests for personal information.

Offshore bank accounts aimed at hiding assets.

Claims of free money from the IRS and tax scams involving use of your Social Security number: Unscrupulous individuals promise refunds to people with little or no income, persuading them to file bogus claims and pay them.

Impersonating charitable organizations: Only donate to recognized charities. Don't be misled by small variations in spelling, don't give out personal information and don't give or send cash.

Claiming false income or expenses.

Falsifying claims.

Frivolous arguments: While taxpayers have the right to contest their tax liabilities, no one has the right to disobey the law. Certain arguments tried in the past to avoid tax liability have been thrown out of court.

Falsely claiming "0" wages: If you're caught, you could be slapped with a $5,000 fine.

Disguising corporate ownership in hopes of avoiding tax liabilities.

Misuse of trust funds: While there are legitimate uses of trusts in tax and estate planning, some questionable transactions promise income tax breaks, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver.

 
 

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