Tax Time

March 17, 2014

Transcript:

Ted Simons: April 15th is approaching, which means it's time to fumble around with receipts and W-2s and other tools of the tax season. Here to give us the latest on tax filing is Bill Brunson, a local spokesman for the IRS and Anthony Forschino of the Arizona department of revenue. Good to have you both here. Thank you so much for joining us.

Bill Brunson: Ted, thanks for having us back.

Ted Simons: What is new this year?

Bill Brunson: Lots of things. First, let's kind of set up a line or a barrier or a line in the sand. 70% of all Arizonans make around $58,000 a year. So what we're going to talk about next are upper earning income individuals. So if your income is $125,000 or more at married filing separately, $250,000 married filing jointly or $200,000 for other filing statuses such as head of household, you may be subject to an additional Medicare tax of 9%, a net investment income tax of 3.8%, a new tax bracket of 39.6% that these upper earning individuals could be subject to. If you have a personal exemption you're claiming that's worth $39,000 for personal exemption, that amount could be partially if not completely phased out for these upper earning income individuals. Or if you itemize, a good portion of your itemizations could be not allowed because of this higher earning income. So those are some of the changes that affect 30% or so of Arizonans who are going to file. Medical and dental expenses, if you itemize, the old threshold was 7.5% of your adjusted gross income. Once you competed that there would be a tax benefit for medical costs. Now it's at 10% for individuals who are under 65. If you're 65 or older, it's still at 7.5% of your adjusted gross income for this year and the next two years. So there's a change there. Same-sex couples. If you are legally married, you must file a married filing joint or married filing separate return for 2013. The IRS has a lot of social media going on, we tweet, we have Facebook, we have developed a lot of YouTubes over 100, one of them deals specifically with same-sex married couples, and it talks about other factors that would be of benefit to them. So I would advise anybody that falls in that category to see that YouTube video and perhaps there's a benefit there I'm not speaking about.

Ted Simons: All right, let's get to state taxes. What's different, what's changed?

Anthony Forschino: One of the things speaking of what Bill talked about with same-sex marriages, for Arizona purposes, we don't -- Arizona doesn't recognize it. So for this purpose, we have created a schedule called schedule S, in which the -- Each of the individuals as part of the taking your adjusted gross income, they have to determine which part belongs to them individually, and then file single returns.

Ted Simons: OK. Part -- This conformity bill that comes up every year, basically says you conform to the feds in certain ways?

Anthony Forschino: Yes. What happens is because our return starts with the adjusted gross income from the federal return, anything that has been changed by the federal government for the year has to be conformed to otherwise we have to change the starting point of the Arizona return. And one of the things they did, they passed a law in which there was payments that came for airline people back in 2011 through 7' and they were able to amend all the returns. We did not conform to that. You get a one-time credit for that amount.

Ted Simons: What happened to the use tax? Is that still around?

Anthony Forschino: It still exists. It started back in 1930 whatever, we still have the use tax. The only difference is it's no longer on the tax return like it was that one year.

Ted Simons: Like it was before that one year.

Anthony Forschino: Correct. Before that one year. It still exists and you still have to pay it, and send it in.

Ted Simons: It's still hide income plain sight.

Anthony Forschino: Exactly.

Ted Simons: Folks still filing online a lot? Are you seeing more of that?

Bill Brunson: We're seeing a slight increase, and we're seeing a slight increase of people filing using their home computers. So that's at about a 15% more this year than it was last year. Approximately 88% of all Americans will electronically file their tax return. So slightly less figure here about 85% Arizonans will choose to electronically file. And there's a lot of benefits not only for you the taxpayer choosing to electronically file, but it saves the federal government which in turn saves yours and my tax dollars.

Ted Simons: As far as if you want to have someone else do your taxes, you look for a tax preparer, pros and cons of going that direction and what do you look for to find a good one?

Bill Brunson: And what do you watch out for to no not get a bad one. The bottom line, taxpayer is signing the return so they're legally responsible for all that information. So if you choose to go to a paid preparer, and about 65% of all Arizonans will, choose one that has a prepared tax identification number. They would have already gotten that from the internal revenue service. A good preparer is going to willingly sign that tax return as a paid preparer. A good preparer will have gone back to the schoolhouse, continual professional education and learned all the new tax law, to explain that to you and how it's a benefit to you. Your bad tax preparer is going to say, charge a service -- Excuse me. For the percent of refund they can get back for you, they're going to charge a certain percentage of that. And that's not a good thing to get into, because it lends itself to unethical behavior and people padding expenses. So if somebody says I only want a small percentage of what I can get back, that's not a good sign. Or they say up front, you're going to get a large refund, I can feel it, I know it, and they haven't worked any of the numbers. So that's another no-no. So something along those lines occur, consider going on down the road. Check with the better business bureau to see who has had bad marks against them as a bad preparer, but for the most part, Ted, preparers are trying to do a good job because that's the way they make their living, and they're out there doing the best they can. But there are a few that are a bad apple. So beware of those that you just don't have a good feeling for it.

Ted Simons: And tax preparers on a state level, they're seeing these school tax -- School tuition -- We talk about it so much on this program, it seems they're changing all the time. Clean election seems like it is changing all the time.

Anthony Forschino: The clean elections you had that $5 deduction on your tax return, and you can get a credit for -- That was completely removed last year. Now I know there's a bill going through that could bring it back again. But it's been removed from the tax return. One of the big things talking about preparers, we have -- We're doing a lot on catching fraudulent refunds. Last year we caught $31 million worth of fraudulent refunds and this year so far tax season we've been catching about two to 2.5 million a week.

Ted Simons: Is that an increase, are you seeing more of this stuff?

Anthony Forschino: We see it a lot. They're out there just trying to hit it. It's filing for dead people, filing with social security numbers, the people are out of state and they try to hit it and we're putting it through criteria.

Ted Simons: And the STOs, school tuition organization, changes there?

Anthony Forschino: Pretty much the same, there's two different pieces, and you can still give until April 15th and get the credit.

Ted Simons: All right. You got about 30 seconds. What if I need an extension?

Bill Brunson: Go to IRS.GOV, click on the free file icon and electronically select -- You can select that particular item, your extension to file at no charge, and summit it electronically. Your extension is for the paperwork, not for paying the tax. They give you an additional six months to summit the information up through October 15th. You need to do it before midnight Tuesday April 15th, to get your extension for six months through October 15th.

Ted Simons: Great information. Good to have you both here.

Anthony Forschino: Thanks for having us.