The Taxman Cometh

Accountants offer advice to help you get ready


Seventy-five days.

That's how much time is left for those who plan to file their income tax returns on time.

That may seem like plenty of time to gather up all those W2s, 1099 forms, receipts for charitable contributions, medical records, prescription records and proof of child-care expenses, but it may not be enough.

"The single biggest mistake people can make when it comes to their taxes is not recognizing when they're in over their heads," said one local accountant. "Recognize your limitations, then call in the professionals."

Accountant Eric Hayes with Seely Mullins and Associates says the most common mistakes on tax returns are also the easiest to avoid.

"General math errors are one of the biggest problems for taxpayers," Hayes said. "People need to go through several times and make sure their numbers add up correctly. It's simple things like that that can trip people up."

Other common and costly mistakes include forgetting to write your Social Security number on the return and forgetting to sign it.

Another tricky point, Hayes said, is figuring out the proper filing status.

"Some people still manage to select the wrong status," he said. "For example, if you are legally separated from your spouse, you would normally file a 'married' return, but each case is different."

Child care credits are often another source of confusion.

"That can get confusing if you don't have everything that you need," Hayes said. "To get proper credit for child care, you need the name of the provider, and their federal identification number."

And, then there's the EIC: "That's the earned income credit, and a lot of people can qualify for that, but there are employers who don't tell their employees if they're subject to the credit," he said.

The EIC is a tax credit for certain people who work and have earned income under $31,152. By taking advantage of the EIC, Hayes said, taxpayers can reduce the amount of tax they owe, or even turn it into a refund.

CPA James Karns said an unfamiliarity with general tax laws is what gets most people in trouble.

"For example," he said, "people who are self-employed don't often realize that they have to pay a Social Security tax as well as their income tax," he said.

For those who plan to have their income tax returns prepared by an accountant, here are a few tips from the professionals:

"First, people need to make sure that all of their data is well organized," Hayes said. "We don't want to see people coming in with a shoebox full of stuff that just adds to the preparation time."

Instead, Hayes said, compile your records, receipts, W2s and 1099s in a tax organizer.

"I also tell people to pull out last year's return, and see what kind of deductions they took on that form," he said. "That's always a good place to start."

Other handy tips, the pros say, include taking deductions for medical expenses and prescription drugs.

"Most drug stores can print out a year-end report of a patient's prescription records," Hayes said. "And patients who have to make long trips to their doctors can claim 10 cents a mile for medical mileage. Usually for that, a receipt of the office visit is proof enough of the trip."

And finally, the accountants said, don't delay.

"Procrastination is not in your favor," Hayes said. "Get it done and get it over with."

To pay or not to pay


Here are a few of the common arguments made by people who refuse to pay taxes followed by the Internal Revenue Service's standard responses:

Argument: The tax code is voluntary and it doesn't apply to the taxpayer. Answer: Federal tax law makes clear that only people whose earnings fall below certain thresholds are not required to file tax returns. Although the tax system is "voluntary" in its reliance on self-reporting and self-assessment, compliance is mandatory.

Argument: Filing a 1040 form violates the right against self-incrimination and right to privacy. Answer: Courts have consistently ruled that disclosure of financial information on a tax return does not incriminate an individual or violate privacy rights.

Argument: The First Amendment's freedom of religion clause is used in various ways, including claiming large charitable deductions or taking a vow of poverty. Answer: Claiming a vow of poverty or taking charitable deductions to a church, then using the church's money for personal expenses, is illegal.

Argument: Labor worth a certain amount can be exchanged for that same amount of money, meaning there is no income to be taxed. Answer: The tax law passed by Congress says all income is taxable unless specifically excluded. Courts have ruled against arguments that taxes on income derived from property are unconstitutional and that income is limited to gain or profit.

Argument: Establishing a business or family trust will reduce or eliminate taxes. Answer: Establishing a trust, foreign or domestic, for the sole purpose of hiding income and assets from taxation is illegal.

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