LIHUE — If a date can trigger an anxiety, fear and anger, it’s this one: April 15. That’s the filing deadline date for personal income taxes. And that’s why it’s crunch time for tax preparers. David Hanley, a tax professional
LIHUE — If a date can trigger an anxiety, fear and anger, it’s this one: April 15.
That’s the filing deadline date for personal income taxes.
And that’s why it’s crunch time for tax preparers.
David Hanley, a tax professional with H&R Block’s Lihue office, said their Kalaheo office is open for tax season and the Lihue office is open year-round. People can still get in by appointment. Walk-in’s are accommodated but there might be a wait.
“When you miss the important things then you leave money at the table,” Hanley said. “This happens when people do their own returns or go through providers that may miss some tax breaks, earned income tax credits, or education opportunity credits.”
The IRS estimates the government holds about $760 million in unclaimed tax credits, Hanley said.
Many tax preparers and software companies offer a free online version available for simple returns. It works well for clients not filing with dependents, credits or adjustments, and the companies offer premium, tier-level services based on the amount and complexity of the returns.
Do-it-yourself preparers, either with software or handwritten forms, might not realize that answering one question incorrectly will take them down a different path, Hanley said. They might also miss a deduction or credit opportunity.
“Tax preparation software has gotten better over the years and we feel ours is excellent,” Hanley said. “We encourage people to come in for the in-person office experience, but either way you will get the best possible experience and outcome.”
Hanley said the best way to begin is to organize a documentation checklist of things to bring to the preparer. This includes:
• Returns — One to three years of previous returns.
• Personal information — Government issued photo ID, SSI or tax ID for self and spouse, paid alimony
• Income — All income documents to include W-2, 1099-MISC, schedules K-1, unemployment compensation form, SSI pension/IRA/annuity income, bank interest and dividend statements exceeding $10, hobby
• Dependents — Information on birth dates, SSI or tax ID numbers, childcare and healthcare provider’s employer identification number or social security number and Hawaii general excise tax license number, income of other adults in your home, form 8332 regarding non-custodial parent
• Education payments — Forms 1098-T, receipts, scholarship records, student loan interest
• Expenses — Credit card statements, receipts, out of pocket medical expenses, health savings and insurance, jury duty records, hobby, prizes, awards, moving expenses, homeowner tax and mortgage interest statements, state and local tax, property or real estate tax paid, vehicle fees, charitable cash and non-cash contributions, job hunting costs, home improvements
“Many times we can complete everything in one sitting,” he said. “Then we can print out a preparation list for next year. If you are missing an item or two we can still get everything together and put a hold on it until you bring in the information and finalize.”
Notable tax breaks expiring after 2013 have to do with students, teachers and homeowners. It is possible that Congress will extend them.
Homeowners should be aware that the mortgage insurance premium tax break is about to disappear. The deduction is for residence interest on higher loan to value ratios on mortgages, and usually applies when borrowing over 80 percent of the home’s worth, Hanley said.
For retirees, this is the last year to enjoy the option of an itemized deduction for state income tax or sales tax. This was a safe harbor sales tax rate, especially for large purchases, based on income level.
“That was a good deduction for taxpayers paying little-to-no state or local income tax,” he said.
Hanley encourages people to contribute to 401K or IRA retirement accounts. There are few areas where people get a double-tax break on both state and federal returns.
For some, April 15 is a day to realize they haven’t gathered the information or forms and so file the IRS Form 4868 — an automatic six-month tax-filing extension to buy time until October 15.
The IRS expects payment of the filing year by April 15. Hanley recommends that people in this situation calculate an estimate and pay the amount with the extension form. Paying avoids incurring a monthly 5 percent fee on the amount owed, and at the very least, file the extension without paying so the monthly interest drops to one-half percent per month.
“If folks aren’t going to have everything together to complete their taxes by April 15, then we encourage them to file an automatic six-month extension,” said Hanley said. “One very common misconception is when people think the extension to file, is also an extension to pay.”
