San Francisco Residents Top List Of Tax Procrastinators

A new study has found that San Francisco residents top the newest tax procrastination list, according to the Wall Street Journal. You can find a snippet of the article below, but the full story can be found here.

The City by the Bay is No. 1 on TurboTax's eighth annual list of Top 10 procrastinating cities, based on how many people used TurboTax's online service to file on the last two days of the filing season in April 2008.

Houston, which has been the No. 1 city three times - more than any other locale - came in at second place, while New York, which has been on the Top 10 list all eight years, came in at third.

Chicago, No. 1 last year, was in fourth place this year, followed by San Diego. Phoenix, Seattle, Los Angeles, Dallas and Las Vegas rounded out the list.

You're not alone

Still not done with your taxes? You're not alone. While almost 78 million U.S. taxpayers filed returns to the IRS through March 20, that still leaves at least another 46 million taxpayers to file in the four weeks from March 20 through April 17 - about 11.5 million taxpayers per week - based on 2007 IRS filing statistics.

The 2008 filing season was an anomaly because people who don't usually file did so to claim that year's stimulus payment. Last year, 137 million returns were filed by April 19, 2008, up from 124 million the year before.

Don't rush

At this point, people are likelier to rush. If that describes you, slow down -- and don't assume your return this year will be similar to last year's.

"With more people having reduced income, they may find that the deductions and credits with income phase outs that made them ineligible in the past, are available to them this year," said Bob Scharin, senior tax analyst with Thomson Reuters' tax and accounting business.

Tax breaks with income phase outs include the child tax credit, education credits and tuition deduction, and deductible IRA contributions. If your income has decreased over the year, check whether you're now eligible for those and other breaks.

"People who had a large drop in income should also look to see if they're entitled to a medical expense deduction this year," Scharin said. To take the deduction, your medical expenses must exceed 7.5% of adjusted gross income. A combination of lower income plus potentially higher health costs - such as paying for Cobra or individual health insurance - could mean you're now eligible.

N.J. Business Briefs

A Roni Deutch Tax Center® franchisee was recently featured in a business brief on NorthJersey.com, for giving free tax returns to the unemployed. Check out a snippet of the article below.

Free tax-return work for jobless

Roni Deutch Tax Centers in Bergenfield and Fair Lawn will prepare free tax returns through March 15 for Bergen County residents who show verification of unemployment.

Paul Nuti of Wyckoff, owner of the two new franchises, said he is offering the free help in response to rising unemployment. Nuti said the average cost of tax preparation at the centers is $200 for a married couple itemizing deductions. Roni Deutch, a California tax lawyer, began franchising tax centers last year. The tax centers are at 3 S. Washington Ave., Bergenfield, and 24-11 Fair Lawn Ave., Fair Lawn.

Tax Season Do’s & Don’ts

Do - File Something
You must file a return with the IRS before April 15. If you do not then you will face penalties and fees that will eventually catch up with you. Even if for some reason you cannot file a return, at least file for an extension using IRS Form 4868. If you are likely to owe the IRS money, also consider sending in a payment to avoid additional fees.

To become eligible for benefits under the economic stimulus package, you need to file a return this tax season – even if you do not normally file a return. The IRS is going to determine the names and addresses of those eligible for a stimulus check based off this year’s tax returns. Therefore, if you do not file a return you will not get up to $600 in payments.

Don't – Omit Any Income
One of the biggest mistakes taxpayers make when preparing their returns is to omit part of their income. Remember that the IRS requires you to report all income including wages, business profits, interest, dividends, capital gains, pensions, tips, and even gambling winnings.

Do – Seek Help
If your taxes are too confusing or you simply have a question about your return, then do not be afraid to ask for help. There are accountants and tax preparation offices all over the country to prepare your return for you. Most will answer simple questions for you over the telephone.

Don’t – Get Audited
Technically you are always at risk for an audit since there is a random element in the IRS’ audit selection process. However, below are five red flags you can avoid to decrease you chances of getting an audit.

1. Drastic changes in income
2. Too many charitable contributions
3. Excessive amount of credits taken
4. Inconsistencies between previous returns
5. Reporting a suspiciously low income

Do – E-file
If you are going to file your return yourself then you should e-file. Studies show that people who e-file make fewer errors. You will also have confirmation from the IRS within a few days of receipt of the return. Additionally, if you chose to have your refund direct deposited, then you will receive it in as little as 10 days.

Don’t – Throw Away Documents
Just because you have sent your return to IRS does not mean it is ok to throw away your important forms, records, and receipts. If you are ever audited you will need all of these documents. Please make sure to store them in a safe place.

Do – Save Your Refund
Although most taxpayers look at a refund from the IRS as “free money,” the smartest thing you can do with your refund is use if to pay off high interest debts. The average household has nearly $10,000 in just credit card debt and most Americans either have a home mortgage or an automobile loan. Instead of wasting your refund on something useless why not pay extra on one of these lines of credit?

IRS Now Processing AMT Affected Returns

Yesterday afternoon, the IRS announced that they have begun officially processing the five tax forms that were affected by the last minute AMT legislation. On Monday, IRS systems began to unofficially accept and process returns that include the five affected forms. After several days of processing, the IRS has confirmed that their systems are in fact working properly.

Back in December, the IRS announced that they would have to delay the processing of several AMT affected tax forms. However, for most people the filing season this year began on time. Only taxpayers whose return included the five affected forms were forced to wait.

The affected forms include:

• Form 8863, Education Credits
• Form 5695, Residential Energy Credits
• Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers
• Form 8396, Mortgage Interest Credit
• Form 8859, District of Columbia First-Time Homebuyer Credit

Outsourcing Tax Return Preparation to India

TaxGuru has made an interesting post on an Indian firm that emailed him in regards to their American income tax preparation services. According to the email the Indian firm was hired by over 35 different American CPA firms last year and prepared over 3,500 tax returns. They charge a very low rate per return allowing a healthy profit to be made by the large CPA firms outsourcing these duties. This company is just one out of dozens that are already offering Indian outsourcing services. According to The CPA Journal some estimate that nearly 200,000 American income tax returns were prepared in India in 2004. Outsourcing these services allows the large CPA firms to lower their hourly expenses by over 50%, while sustaining their high fees.

As this practice becomes increasingly common, I recommend that everyone be cautious when dealing with a firm that outsources to any country. Although the individuals might be trained and might be qualified to prepare taxes, I would still be cautious. Having 100% accurate data in your income tax returns is extremely important. If something is wrong in your return it could result in massive IRS problems, including audits and even owed back taxes. With so much at steak you want to make sure you seek tax help from a reputable company, and outsourcing services to low-paid Indian workers does not exactly scream quality in my eyes. I suggest you ask any firm your considering point-blank if they outsource and where they outsource income tax preparation. If their response is no then you have nothing to worry about. However, if they do outsource I would be very cautious about using their services unless they provide some sort of guarantee.

H&R Block Reports $85.5 million 4Q loss

Earlier today the tax return preparation company reported a $85.5 million, or 26 cents per share, fourth-quarter loss. The company’s mortgage lending division continued to struggle and offsets higher revenue from it’s tax and financial services divisions. The February-April fourth-quarter is when the tax preparation company sees the majority of its revenue because of tax season. By comparison, the company earned $587.5 million, or $1.79 per share, gain during the same period a year ago. You can read the full article at Yahoo News.