drakeshooter
01-13-2008, 09:42 AM
The thing that chaps me is that the IRS wants their money right now. We have to deposit our federal tax, social security and medicare withholdings that we collect from our employees within three business days or risk penalties.
Changes could delay refunds
Late Alternative Minimum Tax freeze could hurt more than help
By Joe Walker jwalker@paducahsun.com--270.575.8656 (jwalker@paducahsun.com--270.575.8656)
Sunday, January 13, 2008
Former Internal Revenue Service agent Ray McLennan will be happy if the agency starts processing claims next month for as many as 13.5 million taxpayers.
His Feb. 11 birthday happens to be the IRS target date to make key credit forms available to people affected by the Alternative Minimum Tax.
The AMT was enacted in 1969 to keep wealthy Americans from using credits and deductions to get off tax-free. But it wasn’t adjusted for inflation and now affects a growing number of middle- and upper-middle income taxpayers.
Congress in late 2007 froze the growth of the tax for year, but the change came so late that the IRS is having to reprogram its systems accordingly. Now a tax preparer, McLennan considers it fruitless for many of his clients to file until Feb. 11.
“Congress waited too late to try to fix it,” he said. “That’s what hurt more than anything.”
People in the Paducah area waiting for forms in February include those claiming credits for education, residential energy, child and dependant care, and mortgage interest.
The AMT targeted roughly the top 20 percent of incomes in 1969, but now it applies to working-class people because no cost-of-living adjustments were built in, he said.
“It’s starting to affect more middle-income class people than was ever intended.”
Acting IRS Commissioner Linda Stiff said last month that her agency regretted inconveniencing millions of early tax filers, especially the roughly 80 percent of taxpayers who typically receive refunds.
But of the 13.5 million affected by the AMT-related forms, only 3 million to 4 million typically file during the early weeks of the season, the IRS says. The average 2007 refund was $2,324.
The IRS did reprogram its computers to start accepting seven other AMT-related forms this month. H&R Block officials have said taxpayers can file earlier by not claiming the credits whose forms are delayed, then filing an amended return to claim the additional credits.
Other problems
In her annual report Wednesday, National Taxpayer Advocate Nina Olson said the delays in filing may especially hurt people who claim the Earned Income Tax Credit. When the credit exceeds the amount of taxes owed, it results in a tax refund.
“For some taxpayers, a delay of two to four weeks in receiving the refund could mean eviction, inability to pay the high heating bills that arise during winter, or defaulting on credit card bills from the holiday season,” Olson said in her report to Congress.
The report said taxpayers who claim the EITC have an average refund exceeding $3,000, or about 20 percent of their yearly income.
The IRS finalizes individual tax forms in November. Olson said more than a million taxpayers could have missed claiming 2006 deductions because they filed extensions too late. She estimated 1.4 million fewer claims of deductions for state and local sales taxes and certain school expenses for 2006 than 2005.
“When taxpayers do not claim tax benefits because they do not know about them,” she wrote, “Congress’ intent in providing the tax benefits is undermined, and taxpayers understandably question the fairness of the tax system.”
Tax law changes
Alternative Minimum Tax laws were passed in 1969, targeting very wealthy families who used special deductions and expense credits to avoid paying federal income tax. The AMT got rid of certain loopholes but wasn’t adjusted for inflation, so it affects more and more middle-income taxpayers as the cost of living rises.
Congress in late 2007 froze the growth of the tax for one year, preventing more than 20 million families from having to pay an additional $2,000 on average.
But the late change means up to 13.5 million taxpayers won’t be able to file returns until about Feb. 11 when the IRS should have certain forms available and be finished reprogramming its systems. The delay will affect people in the Paducah area using:
Form 8863, Education Credits.
Form 5695, Residential Energy Credits.
Form 1040A’s Schedule 2, Child and Dependent Care Expenses for Form 1040A filers.
Form 8396, Mortgage Interest Credit.
Information: www.irs.gov/formspubs (http://www.irs.gov/formspubs)
Changes could delay refunds
Late Alternative Minimum Tax freeze could hurt more than help
By Joe Walker jwalker@paducahsun.com--270.575.8656 (jwalker@paducahsun.com--270.575.8656)
Sunday, January 13, 2008
Former Internal Revenue Service agent Ray McLennan will be happy if the agency starts processing claims next month for as many as 13.5 million taxpayers.
His Feb. 11 birthday happens to be the IRS target date to make key credit forms available to people affected by the Alternative Minimum Tax.
The AMT was enacted in 1969 to keep wealthy Americans from using credits and deductions to get off tax-free. But it wasn’t adjusted for inflation and now affects a growing number of middle- and upper-middle income taxpayers.
Congress in late 2007 froze the growth of the tax for year, but the change came so late that the IRS is having to reprogram its systems accordingly. Now a tax preparer, McLennan considers it fruitless for many of his clients to file until Feb. 11.
“Congress waited too late to try to fix it,” he said. “That’s what hurt more than anything.”
People in the Paducah area waiting for forms in February include those claiming credits for education, residential energy, child and dependant care, and mortgage interest.
The AMT targeted roughly the top 20 percent of incomes in 1969, but now it applies to working-class people because no cost-of-living adjustments were built in, he said.
“It’s starting to affect more middle-income class people than was ever intended.”
Acting IRS Commissioner Linda Stiff said last month that her agency regretted inconveniencing millions of early tax filers, especially the roughly 80 percent of taxpayers who typically receive refunds.
But of the 13.5 million affected by the AMT-related forms, only 3 million to 4 million typically file during the early weeks of the season, the IRS says. The average 2007 refund was $2,324.
The IRS did reprogram its computers to start accepting seven other AMT-related forms this month. H&R Block officials have said taxpayers can file earlier by not claiming the credits whose forms are delayed, then filing an amended return to claim the additional credits.
Other problems
In her annual report Wednesday, National Taxpayer Advocate Nina Olson said the delays in filing may especially hurt people who claim the Earned Income Tax Credit. When the credit exceeds the amount of taxes owed, it results in a tax refund.
“For some taxpayers, a delay of two to four weeks in receiving the refund could mean eviction, inability to pay the high heating bills that arise during winter, or defaulting on credit card bills from the holiday season,” Olson said in her report to Congress.
The report said taxpayers who claim the EITC have an average refund exceeding $3,000, or about 20 percent of their yearly income.
The IRS finalizes individual tax forms in November. Olson said more than a million taxpayers could have missed claiming 2006 deductions because they filed extensions too late. She estimated 1.4 million fewer claims of deductions for state and local sales taxes and certain school expenses for 2006 than 2005.
“When taxpayers do not claim tax benefits because they do not know about them,” she wrote, “Congress’ intent in providing the tax benefits is undermined, and taxpayers understandably question the fairness of the tax system.”
Tax law changes
Alternative Minimum Tax laws were passed in 1969, targeting very wealthy families who used special deductions and expense credits to avoid paying federal income tax. The AMT got rid of certain loopholes but wasn’t adjusted for inflation, so it affects more and more middle-income taxpayers as the cost of living rises.
Congress in late 2007 froze the growth of the tax for one year, preventing more than 20 million families from having to pay an additional $2,000 on average.
But the late change means up to 13.5 million taxpayers won’t be able to file returns until about Feb. 11 when the IRS should have certain forms available and be finished reprogramming its systems. The delay will affect people in the Paducah area using:
Form 8863, Education Credits.
Form 5695, Residential Energy Credits.
Form 1040A’s Schedule 2, Child and Dependent Care Expenses for Form 1040A filers.
Form 8396, Mortgage Interest Credit.
Information: www.irs.gov/formspubs (http://www.irs.gov/formspubs)