The Most Wonderful Time of the Year: Tax Time?
Whether you’re a do-it-yourself at home taxpayer, or you’re a let the accountant handle it taxpayer, one constant remains, and that constant is that tax season is aggravating. This year tax season is even more aggravating than in recent years. Here are four reasons why.
Paying the Price for Your Obamacare
If you were among the seven million Americans who took advantage of the health insurance marketplace in 2014, you might owe on your taxes. H&R Block is estimating that many of the Americans who utilized the insurance marketplace owe on their taxes. This is due to underestimating income while receiving a health insurance subsidy. H&R Block stated the average decrease in tax refunds over last year is seventeen percent.
If you decided to ignore the Obamacare mandate, and you do not qualify for a hardship exemption, you might not owe on your taxes per say, but you could face a monetary penalty. The average penalty for going without insurance in 2014 is $172.00. Although true numbers are difficult to come by, estimates put uninsured Americans around eleven percent for 2014.
Fraud: Injury to the Victims and the Collateral Damage of Increased Processing Times
Tax fraud comes in many forms, and this year is no exception. An alarming number of states indicated that taxpayer fraud is rampant this year. Apparently, criminals are using at home tax preparation software to impersonate tax payers and file fake returns. TurboTax appears to be the software of choice for tax fraudsters. This doesn’t exclusively impact the unfortunate taxpayers who are victims of fraud, but it also impacts taxpayers who use TurboTax in general. For instance, Minnesota put a temporary halt on any tax returns generated via TurboTax.
Additionally, the pervasive fraud caused many states to slow down their refunds and scrutinize incoming tax returns. That means you will be waiting longer for your tax refund. For example, Ohio advised that even with e-file it’s taking the state nearly a month to issue a refund. Contrast this with the three or four days it took Ohio to issue a refund on e-filed taxes last year.
Even the IRS is Hurting around Tax Time
If you tried to reach an actual living breathing human being representing the IRS last year it’s very likely you were unsuccessful. Last year a tax advisory group estimated that one in three calls to the IRS went unanswered. This year won’t be any better, and in fact it’s likely that dealing with the IRS will be more difficult this year.
The IRS budget decreased seventeen percent from since 2010 due to adjustments for inflation and other budgetary constraints. I addition to that, the IRS is working with less staff than in recent years. That means less people are attempting to resolve the one-hundred million phone calls, ten million mailed inquiries, and the one-hundred-sixty returns that they received to date.
Don’t Wait. Capitulate, and File Your Taxes
The IRS stated that they received 335,000 fewer returns this year than at the same time last year. That means that people are waiting to file. This means that when they decide to file they will be scrambling to get everything that is needed. More than that, it means that the IRS will be processing a flood of returns at the same time. That will likely translate into more delays for taxpayers waiting on tax refunds.
In addition to getting stressed and waiting longer for your refund, waiting to file has some other downsides. For one, the closer the tax deadline the more tax filing costs. It’s usually the trend that accountants and other tax services increase fees nearer the tax deadline.
Waiting too long also echoes back to other points raised above. The fraudsters who are taking advantage of people are preying on the procrastinators. In other words, the quicker you file the less likely you are to be a victim of identity theft and having your tax refund fraudulently filed.
With everything going on this tax year it’s best to give in. You should file as early as possible. You might not get your refund any faster, but you have to file anyhow, and you will help to avoid the other stress factors associated with this tax year. With some luck, this article got you thinking about how to advise clients properly and build their trust. They will be the best source of referral business for you, and you need to protect them from going to other tax preparers who may promise them a “better deal”.
Also, if you’re not doing electronic tax filing on their behalf, you should. If you efile 1099 and other tax forms for them, your customers should receive their refunds much faster. I would also suggest that you follow my lead if you’re still mailing tax forms. I use eFile4Biz.com to file 1099 online. The time saved allows me to focus on clients. This service also “talks” with the major software brands, including printing and delivering tax forms for me. Their short video below explains it all.