ORIGINALLY WRITTEN DON RATZLAFF
Every new year brings change for taxpayers, whether its new circumstances in one’s personal financial situation or new tax laws that regulate the system.
Area tax preparers and financial advisers agree that even though it sounds self-serving, professional help is growing ever more significant for those hoping to keep their tax bill to a minimum.
Help is particular necessary when out-of-the-ordinary transactions occur, said Jim Labelle of Jim’s Accounting & Tax Service in Marion.
“People need to consult with the tax adviser if they have sold a home,” LaBelle cites as an example. “Better clarifications were made this last year on the sale of a residence and how it’s figured.”
LaBelle offered several other suggestions:
— If you change tax preparers, bring along a copy of last year’s tax return.
— Be sure the Social Security numbers for you, your spouse and your dependents are all exactly the way they appear on the individual Social Security cards.
“The IRS, three or four years ago, for the first time in history, linked up to Social Security,” he said. “They can tell within just a short time if the Social Security number belongs to that name. (Discrepancies) cause a lot of rejections of tax forms.”
— Don’t believe all the claims made about quick refunds. Promises of refunds within a week are rarely fulfilled.
“There’s a lot of things that can stop the money from coming back,” LaBelle said. “For instance, IRS has to approve the form first. At the very best, it’s more like 10 days instead of a week.”
Andy Shewey of American Express Financial Advisors, Inc., of Hillsboro, said changes have been made in the capital gains rates on investments held over a given period of time. The rates will be slightly lower than originally established in 1998.
“It’s the kind of thing that for most people, it’s not even going to make a difference in how they make decisions,” he says. “For a few people it will. It will just be an added benefit.”
Other tips and reminders from Shewey:
— “I keep meeting people who aren’t aware of the tax advantages the Roth IRA offers down the road, that they have until April 15 of this year to make investments for the year 2000 yet.”
— “From an investment standpoint, with the stock market going as crazy as it is, if people are investing in stocks, bonds and mutual funds-anything that is stock related-they should maintain their focus and do the right things based on their time frame.
“A person with a long enough perspective, if they don’t need their money in the next six to 12 months, should just continue investing it as they have.”
Dawn Wedel of Tax Plus in Marion offered several tips and insights:
— “If you’ve had a loved one die and inherited some property, be sure to talk to your tax adviser or tax preparer about the estate settlement because some items may be deductible on your Schedule A federal tax form.”
— The interest deduction for student loans has increased to $2,000.
— More people will be eligible for the earned-income credit this year.”
— More people will be allowed to take the IRA deduction even though they’re in another retirement plan.
— The business mileage rate is 32.5 cents per mile this year.
— The standard deduction has increased to $7,350.
— The mile-allowance deduction for truck drivers, railroad workers, pilots and other people who are under the U.S. Department of Transportation’s hours of service limit has increased to 60 percent from 50 percent.
— Wait until you have all of your W2 forms before you visit your tax preparer.
“Every year, invariably people come in, we file their taxes and they come back back two weeks later with another W2,” she said. “It happens more frequently than you’d expect. I have to charge (the client) again because I have to do an amended return.”
— Even though you didn’t itemize deductions in the past, don’t assume you shouldn’t this year. Your situation might change from year to year.
“You should ask your tax adviser,” she said. “You might be better off to itemize than to take the standard deduction.”
— For the second year, if a taxpayer owes money to the IRS, he or she can use a credit card to pay the balance.
“A lot of people aren’t aware of that,” Wedel said.
— Finally, taxpayers are less likely to receive notices of errors on their tax returns if they file electronically.
Also, she added, electronic filing usually means quicker refunds and fewer errors.