In today’s day and age, there are many options available to help prepare your taxes. Many people rely on “canned” software to easily and cheaply get their returns completed. But is this the right way to go?
The United States Tax Code has become increasingly complicated over the years. Between 1955 and the present, the Tax Code increased from 409,000 words to more than 2.4 million words. This is double what existed after the major tax reform of 1985. There are over 60,000 pages of tax-related cases in the US court system records. In 2014, the number of taxpayers paying Alternative Minimum Tax (AMT and also known as the “secondary tax code”) rose 7.8% to 4.3 million taxpayers. Tax liability rose 10% to $1.4 Trillion while Adjusted Gross Income only rose 6.1% to $9.7 Trillion.
In 2014, over 1.2 million individual taxpayers were audited with additional taxes of over $11.8 million being imposed. Making a mistake on your tax filing could make you more susceptible to an audit by the IRS. Interest and penalties magnify the problem. Even if you don’t agree with changes made to your taxable income based on an error made when preparing your own return, in then end the tax is still due. However, when these errors are corrected, you will pay interest and penalties to the IRS of approximately 8% combined in addition to what’s owed to the states; Wisconsin charges between 12% and 18%.
Increasingly, the Federal government as well as most states are in need of revenues and continue to search out places to find them. As a taxpayer, you need to be sure you are not under-reporting income but also that you are not missing out on tax savings possibilities. A few questions to consider include:
- Are you reporting all your unpaid sales tax obligations?
- Did you work in another state and remember to file a tax return for the time you worked there?
- Did you correctly report any payments to or credits from the new health care exchange?
- Did you take advantage of rolling your retirement plan over to a Roth to help you or your future heirs avoid taxes?
- Did you correctly report any payments on form 1099?
- Did you report any overseas investments?
- Did you remember the special state medical deduction?
Your Wisconsin-licensed CPA follows strict guidelines for all aspects of their services including their continuing education requirements. These requirements help assure they are up to speed on the continuously changing tax regulations at the federal and state levels.
Just like anyone can cut their own hair, anyone can prepare their own tax return. However, the end result is not always pretty. At Reilly, Penner & Benton, we form great partnerships and help our clients obtain the best results possible for their tax and accounting needs. To learn more, contact us today.
Article by: Brad Voght, C.P.A.