Bill Brunson of the IRS and Anthony Forschino of the Arizona Department of Revenue have the latest information about filing your taxes and what they’re doing to combat tax fraud.
Ted Simons: The tax-filing deadline for this year is April 17th, which makes for a couple of extra days to get the job done. I recently spoke with Bill Brunson of the IRS and Anthony Forschino of the State Revenue Department about other news that may be helpful in filing your taxes.
Ted Simons: Gentlemen, good to have you here. Thank you so much for joining us. Bill, what do we need to know about tax filing this go-around?
Bill Brunson: Well there hasn't been a lot of major changes but people need to know that they can still prefile, which is a part of IRS.gov and choose to electronically file their tax return for free, for all Arizonans no matter how much you make or how complex the tax return is. They can go there and electronically file their tax return for free. If your income is around $57,000 or less, your traditional free file where you can choose among 20 different software providers and that software will lead you the hand. If you're fortunate enough to have income in excess of that, then you would be using fillable forms. It's an interactive type of return and you electronically submit it. All Arizonans can electronically file and that's very important in the sense that it's so fast and accurate and secure and you only have a couple more weeks.
Ted Simons: Indeed. As far as the state is concerned, anything different this go-around?
Anthony Forschino: There's not a lot of differences some. The only big thing is a use tax line. Used tax is the tax that is -- it's similar to the sales tax but it's for those purchases you make from out of state companies online, mail order and that company doesn't charge the tax. The customer is still responsible for that tax.
Ted Simons: So I buy $100 worth of books or clothes or something along these lines, got to declare it myself. And this has --
Anthony Forschino: The tax has been since 1955. And it's always been in our booklets, even to say here's where you will send the money in. This is the first year it's a line on the tax form.
Ted Simons: So basically, if the state hasn't paid or they haven't paid the state, you've got to pay the state. And is the state ready to enforce this? This is huge.
Anthony Forschino: It's going to be a very tough situation to just enforce that particular line. They think what it is is just like a regular audit if you're auditing someone, we will look for that but I don't know how much we're going to do about that.
Ted Simons: What is fresh start?
Bill Brunson: It is an initiative to help people who owe money. Last year, we brought it out and this year, we've enhanced it so that if your liability, the amount that you owe the federal government is $50,000 or less, we can streamline you into a payment arrangement with little or no paperwork. If you've been out of work for 30 days or more and your income is $200,000 or less, then we can waiver a late payment penalty for you for six months or if you're self-employed and your income has seen a reduction of a quarter, 25% or more, due to the 2011 economy, then we can also waiver that late filing penalty for you. So you've got penalty waiver, you've got paperwork reduction, and on that $50,000 or less, the payment period is extended from 60 months to 72 months so you have a little bit more time to pay back the money to the federal government.
Ted Simons: Is this relatively new?
Bill Brunson: Fresh start in this essence, probably as of the 1st of March. So those enhancements are new for the individual who does owe.
Ted Simons: What about extensions for folks who for whatever reason need to extend? Still there?
Bill Brunson: Easy, just go to IRS.gov, click on that free file icon. You can do it electronically, just before midnight April 17, Tuesday. Don't wait until that time.
Anthony Forschino: For purposes of Arizona, if you don't owe, you can just use the federal extension. You don't have to do a separate one for Arizona.
Ted Simons: Arizona is tagged onto the federal one with the idea of being a symbiotic relationship. How do things change between the state and the feds?
Anthony Forschino: I guess the difference is it all depends on -- we start with the federal adjusted gross income but what changes along the way is if there's any additional additions or subtractions and that would mean in some cases if the federal government charges -- if there's a tax on the Social Security income because somebody makes a certain amount, and then there's a tax, that would be added back. Municipal interest would be added back. We don't tax part of the -- I think it's the first $2,500 of federal and state retirement. So those types of things are the differences, and then the added additions if there's any additions and then, of course, there's those credits that we have that the federal doesn't have.
Ted Simons: Something that doesn't change between state and fed I'm sure is tax fraud, especially at the federal level. What's the latest scam, what do we get to watch out for these days?
Bill Brunson: The Internal Revenue Service takes this very seriously. The latest scam on the street deals with the American opportunity credit, which is an allowable credit for people that go to college in their first four years and it's worth $2,500. But the tax scammer is saying to you the individual I can get your refund with no documentation and I know that you're elderly, I know that you've gone to school 25 years ago or so, I can use this American opportunity credit and tie it to you going to school, 25 or 30 years ago and get your refund. Or those groceries you buy every week at the store, that tax that you pay, I can get that back to you through the American opportunity credit but all I want from you is a few dollars to prepare the return, and then I'll get your refund. So what happens is the taxpayer buys into this scam, submits the return, the tax scammer has your money in their pocket. They're down the road, and then you get a letter from the IRS asking why you filed a frivolous return. So it literally is one of those -- if it sounds too good to be true, you don't want to buy into it. There are other scams out there that people fall victim to and it's unfortunate.
Ted Simons: Identity theft I would imagine would be huge along the lines of the bill that's mentioned but in other ways, as well. How big a factor is this?
Anthony Forschino: It is a big problem for Arizona for purposes of the fact that a lot of people are filing two ways. They're either filing someone else's Social Security before you get to it so somebody's filed for you before you even had a chance to or they're creating Social Security numbers by using dead people or Social Security numbers that they're creating for children or whatever, and then filing under those and hitting them as much as they can as fast as they can and trying to get a refund.
Ted Simons: Bottom line, safer to file electronically?
Bill Brunson: You bet. Your electronically filed tax return is completely accurate. Less than one half of one percent of an error rate. It will do all the math, it will make sure that you have all the attachments and forms. If you have a refund coming and you provide a direct deposit information for your checking or savings account, 21 days or less, it will be in your savings or checking account and it can't get lost or stolen. Savings to the federal government, 17 cents to process, an electronically filed tax return, $3.66 for a paper return. The error rate is 15% on a paper return. So there's a lot of benefits there to electronically filing your tax return and everybody can go to free file at IRS.gov and submit their return electronically.
Ted Simnons: And if you are getting a refund, it's a good thing to go ahead and get the money because some folks still haven't done that.
Bill Brunson: 2008 tax return you bet. We're looking for 29,000 Arizonans who have about $25 million that they're going to leave on the table if they don't file before midnight April 17th. The median amount is about $558. The Internal Revenue Service by seeing third-party information submitted to it, Social Security information on the w-2s, they have a refund coming if they file a tax return and we're not certain why they're not doing that. If they don't, they're going to forgo the ability to claim that refund.
Ted Simons: Thanks for joining us. We appreciate it. And that is it for now. I'm Ted Simons. Thank you so much for joining us. You have a great evening.
Bill Brunson:IRS; Anthony Forschino:Arizona Department of Revenue;