This tax season is filled with complexities like the late-breaking fiscal cliff negotiations that led the IRS to delay the start for eight days. Here are some tips and information on how these and other complexities will impact taxpayers this year and how to get the most out of this year’s return, including:
The fiscal cliff negotiations will affect this year’s tax return – the late-breaking legislation resulting from the fiscal cliff negotiations has already impacted taxpayers’ paychecks as the Payroll Tax Holiday expired and was not extended, meaning this tax benefit that had lowered the taxpayer required Medicare tax payment by 2 percent in 2011 and 2012 is no longer there. Taxpayers have already seen a 2 percent drop in take-home pay.
Avoid tax return identity theft – Tax return identity theft is a huge issue and is on the rise, with more than 1.2 million cases identified by the IRS in 2012. Thieves essentially steal identity information and file a fraudulent return in the victim’s name to collect the tax refund. Filing early can help safeguard you from identity theft by locking out criminals.
Life changes can drive more significant tax changes – There are many more life changes to consider than the ones you always hear about like having a baby or buying a home. Other common life changes that happen more and more today can also lead to a larger refund, such as a child returning to live at home, caring for an aging parent (note the parent does not have to live with you to trigger the tax benefit) or even you or your spouse deciding to go back to school.
The IRS is not able to regulate tax preparer – Earlier this month, a federal judge ruled that the IRS does not have the authority to regulate the thousands of previously unregulated tax preparers the IRS had planned to regulate. Approximately 60 percent of Americans enlist the help of a paid tax professional to file their income tax returns according to the IRS, and without federal oversight, it’s essential that consumers know what to look for in a qualified tax preparer.
With so many recent and significant tax law changes, a paid preparer needs to be knowledgeable and up-to-date on the American Taxpayer Relief Act of 2012 and how it applies to your situation.
E-file your return – There are great benefits to e-filing a tax return, include faster processing time (you can receive your refund in 7 to 13 days), greater accuracy and confirmation the IRS has received your return.