Tax time looms

The IRS itself got off to a late start this tax season thanks to the 11th-hour debate in Congress over the “fiscal cliff” and passage of the American Taxpayer Relief Act on Jan. 2. While the agency was able to start processing most returns on Jan. 30, some individuals and businesses weren’t able to file until the IRS finished adjusting the processing system to reflect the current law.

As of March 3, “there’s no longer a delay for anyone,” IRS spokesman Bill Brunson told the Journal in an interview.

Most working people received their W-2 wage-and-tax statements early this year. If you haven’t gotten a W-2 yet, ask your employer, Brunson said. “And if you don’t get it after you ask for it, then contact the IRS and we’ll contact them.”

From its origins in the mid-1980s, electronic filing today is convenient, highly accurate and the filing choice of 780,000 New Mexicans, Brunson said.

“You can go to IRS.gov and click on the ‘Free File’ icon and electronically file your returns for free,” he said.

If you earn $57,000 or less – roughly 70 percent of all New Mexicans fall into that category – you can use the traditional Free File.

“The software literally leads you by the hand,” Brunson said. “We’ve got 15 or thereabouts software companies, like TurboTax, that have joined with the IRS and are offering this to people for free as long as they go to IRS.gov and click on that Free File icon.”

Free File fillable forms, the electronic version of IRS’ paper forms, also are available.

“You have to have a little more understanding of the tax return, but it still is electronically compiled and submitted,” Brunson said.

Requesting an extension

People who need more time to finish their returns can get an automatic six-month tax-filing extension by going to the Free File link, or by filing a Form 4868.

“The extension to file is for the paperwork being submitted, not the tax due,” Brunson said, noting there are penalties for filing either late. Late filing is more severe than late paying.

“If I don’t have my return together and I know I owe my uncle money, I’m going to request an extension to give me more time to get the correct amount I actually owe and forego that late filing penalty,” he said.

He recommended that if you owe taxes, file a return and pay what you can. You will get a formal billing. “Once they get contacted by the IRS, we can start working with them as to a payment arrangement if that’s what they want to do,” he said.

Free tax help is available to taxpayers who qualify for the IRS-certified programs Volunteer Income Tax Assistance and Tax Counseling for the Elderly.

“They can’t prepare business returns and they can’t really do complex (returns) because that’s not what they are set up for,” Brunson said.

VITA – with which Tax Help New Mexico is affiliated – offers help to people who make $51,000 or less. TCE help is available to those 60 or older and specializes in questions about pensions and retirement issues.

“You can go to IRS.gov and search for free tax help and it will bring up a phone number of an automated device where you key in your ZIP code and it will let you know where free tax help is in your neighborhood,” Brunson said.

Many people, of course, choose to use the services of a professional tax preparer. IRS recommends you do it with care. Check qualifications and the preparer’s history, and make sure to ask about service fees. The agency also recommends that your preparer offers IRS e-file and is reachable after you file in case questions arise about the return.

Earned-income credit

If you earned $50,270 or less in 2012, check to see if you qualify for the earned-income tax credit, which varies based on income and family size. It is a refundable credit, meaning you could get money back even if you had no tax withheld. To get the credit, you have to file a return and specifically claim it, even if you aren’t required to file, however.

Brunson said the agency estimates one in five New Mexicans that would qualify for the earned-income tax credit in 2012 will fail to claim it. You can check to see if you qualify by using the EITC Assistant on IRS.gov.

People attending college might qualify for either the American opportunity tax credit or the lifetime learning credit, or for any of several education-related tax benefits. In general, they are available to taxpayers who pay qualifying expenses for an eligible student, which could be the primary taxpayer, spouse or dependent.

The American Taxpayer Relief Act enacted Jan. 2 extended the American opportunity tax credit – good for freshman through senior year – for five years. The lifetime learning credit, already a permanent part of the tax code, applies to anytime you are going to college, Brunson said.

“You can’t do them both, but if you qualify, it can make a significant difference in your tax return and help you continue on with your college education,” he said.

Unfortunately, there are other things to watch for this tax season: The IRS says someone may be pretending to be you to bilk Uncle Sam.

“We’ve seen a huge increase nationwide,” said IRS special agent Brian Watson of the incidents of identity theft. “A lot of criminals have realized they can steal money from the government by stealing someone’s Social Security number and filing tax returns.”

He added, “People have heard this stuff before, but you’ve got to guard your Social Security number: Don’t give it out unless you have to, be very cautious when someone calls or sends you an email, and protect your computer by having a firewall or antivirus software.”

On the brighter side, a recent poll suggests an overwhelming majority of you try to be as accurate as you can when you file with the IRS. The IRS Oversight Board survey, in fact, shows 87 percent of the respondents said it is “never” OK to cheat on their income taxes.