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Reprint from the South Side Scoop.
The Educated Consumer
An interview with Derek D. McNeal

Understanding Your Taxes

It is important for you as a taxpayer to know that not just April 15 is tax day-every day is tax day. Business owners should be thinking “deductions” -for example, home office space, business use of cars, etc.- from day one.

Tax Return Technology Many advances have been made in the area of tax preparation. Tax preparers nowadays have new “tools” at their disposal. Telefile has been available in Illinois for a year. You can now file your tax return over the telephone if you meet certain requirements (if you’re single, don’t own real estate, and do not have itemized deductions or complex tax issues such as retirement accounts). The IRS selects certain taxpayers who it deems eligible to file

An Internal Revenue Service (IRS)- sponsored program, electronic filing , allows you to file your taxes yourself via computer by going online; or you can go to a tax preparer who uses his or her computer. You are usually able to receive your tax return in only three weeks.

Be careful when a tax preparer says that you can have use of your refund immediately if you agree to take out a a personal loan. What you are doing is using your tax refund as collateral on the loan and paying interest on your own money. At rates that can range from 18 to 100%! And if it so happens that there’s a discrepancy in your tax return form-if the IRS recalculates (lowers the amount of your refund because it disagrees with some of your information-there could be a problem. You have agreed to take out a loan for more than you’re owed. You can mess up your credit if you can’t pay that extra amount easily.

When you owe the IRS

For those who have to pay federal taxes, there is a new program that allows you to pay them with a credit card. Try not to do that. You are paying interest in order to pay off a government debt. It is better to call the IRS and set up an Installment agreement . A lot of us in the ‘hood are not told that 90% of tax debts are paid in this way. Another IRS program is called the offer in compromise , where your tax preparer / accountant negotiates the percentage of the amount owed that you are required to pay back.

Late Filings

If you just can’t get your taxes done by April 15, contact the IRS and request a four-month extension (ask for form 4868). Make sure that you have the amount that the IRS says you owe by the end of that extension period. If you do not the IRS will tack on interest and penalties, which can equal up to 30% of the original amount.

Know your tax preparer

There are basically three types of tax preparers: 1) Commercial tax preparers include H&R Block and Jackson and Hweitt. The downside is that, because they open storefront offices during tax season, they might not be around should the IRS have trouble with your return. 2) Enrolled agents have usually taken (and passed) an IRS-written, two-day written exam. They are usually very sharp. 3) Certified public accountants (CPAs) have accounting degrees and are licensed by the state. They are also bonded and are required to take continuing education courses, as are enrolled agents.

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