Tax tips as 2014 filing season gets underway

January is the start of tax season when various documents and forms begin arriving in the mail. Some returns are easy to fill out by the taxpayer, but having professional help can prevent many headaches when it comes to filing more complex forms.
Mary-Lynne Donnelly, a master tax advisor, and enrolled agent at Scotts Valley’s H&R Block, can answer any question regarding tax filings.
Benefits of Filing Early
The IRS does not begin receiving tax returns until Jan. 20. Donnelly explained that some people aren’t aware that they can file tax returns at any time between Jan. 1 and April 15. H&R Block can file a considerable amount of returns that sit in a queue and are processed as soon Jan. 20 rolls around.
“We have found that some of those that we did file on the 20th already have refunds back in their bank accounts, it only took 10 days,” she said.
Seeking Profession Help with Taxes
When a taxpayer seeks professional help with their taxes, the time it takes for the paperwork to be properly filed and submitted varies depending on the complexity of return.
“Someone with a simple W-2 is not going to take as long as someone who is, say self-employed, or has rental property, or complicated stock options — those require longer appointments,” Donnelly said.
The average appointment to file a return at the Scotts Valley H&R Block usually spans an hour.
“In most cases we can complete the return during that one sitting and that one appointment time from the very beginning to electronically filing,” she added, “and, in this day and age, we have immediate response from the IRS and the state of California both as to whether or not that return has been accepted as filed.”
Changes to the Tax Code: The Affordable Care Act
Donnelly said that the single largest change to the tax code this season is the Affordable Care Act. The IRS is in charge of the ACA and is the agency responsible for collecting and overseeing the government-subsidized health care.
“Those who have applied to Covered California will receive a brand new tax form this year, it’s a 1095-A and it will show their coverage period by month and will show how much their shared responsibility for payment was and how much the state of California paid on their behalf for health care.”
However, there are certain exemptions that may apply to those who failed to enroll in health insurance for 2014.
These exemptions can excuse a person from not having health care for the whole year, but for the most part, everyone has to have health care for that year.
“If someone didn’t have health care for the year, we calculate that, too,” Donnelly said, “to calculate what their tax penalty is for not having health care and that is the greater of $95 or 1 percent of their gross income, minus their filing status amount.”
Missing the Deadline to File
The deadline to file federal income taxes in the United States for 2014 is April 15th.
“If you don’t get them filed by April 15, you can always file an extension, but that extension is only an extension to file,” Donnelly said. “If you think you are going to owe any taxes, April 15 is the deadline to pay them. If you file an extension, you can always file from April 16 to October 15, but you have to have paid the tax that you owed.”
 
Common Tax Forms
“W-2 is the most common, it comes from employers,” Donnelly said. “Another one we’ve seen on the rise in the past years is the 1099-miscellaneous and that’s what’s issued to the independent contractor and the IRS is kind of tightening the rules about independent contractors because a lot of employers are issuing those in an effort to not be responsible in paying the taxes for employees.”
Many clients come to professionally enrolled tax agents or specialists with 1099s and are often surprised that no taxes were paid on their behalf, Donnelly said.
“For our older clientele, we’ve also got Social Security forms and pensions that are paid during the year,” she said. “Other common tax returns have what’s known as a schedule, where they itemize and that’s usually property taxes and mortgage interest where they can write that off against their other income.”
H&R Block has a program called “Free Second Look,” where customers can bring in taxes done somewhere else, and the specialists will go through them and make sure they were done properly, Donnelly explained.
Often times, advisors can find money that was missed the first time around and then an amendment can be prepared so that the client can get that money back.
“We have found that the IRS has issued more than $300 billion in refunds last year and last year, approximately three out of every four taxpayers got a refund with an average of about $2,800,” she said.
According to an H&R Block; “Taxpayers leave about a billion dollars on the table, actually 50 percent of do-it-yourselfers make an error on their tax return and half of those leave money still owing to them.”