Refunds up along with number of returns

Published 7:46 pm Monday, March 16, 2009

By By JESSICA SIEFF / Niles Daily Star
Where it is often the case many Americans dread tax season, this year, the general attitude may be slightly different.
This tax season, taxpayers will most likely head to the offices of their tax professionals hoping to get the most money possible out of their returns, as the recession and rising unemployment continues to affect households across the country.
And they may just find relief in doing so. According to the Internal Revenue Service (IRS), "as of Feb. 27, 2009, the IRS had received 56 million individual tax returns, a slight increase over the previous year. And, the average individual refund was $2,869, a 9 percent increase or $232 more than the same time last year.
"The IRS notes that possible reasons for the larger refunds may include taxpayers benefiting from the recovery rebate credit and other tax breaks such as the first-time homebuyer credit and the additional standard deduction for real estate taxes. The average refund amount generally will decrease slightly as the filing season progresses."
Which means tax professionals like Ken Daniel, who said he's been preparing taxes for his clients in Niles for 40 years, are well into their busiest time of the year.
"It's kind of an interesting year," Daniel said. "Most of the people who have W2s have unemployment also." Unemployment can make a difference for those families, he said.
Daniel said having a trusted professional look at financial standing and income taxes is one way of ensuring the most is made of a return.
"Now is the time to get professional help because there are things that can be done," he said. "There is more opportunities to affect the amount they will be getting back."
The refunds are generally higher than in previous years, Daniel added – but he stressed the importance of using the money received through tax returns wisely and suggested more people look at the positives of putting money into an Individual Retirement Account (IRA).
"A lot of people think they can not afford to put money into IRAs," Daniel said. Storing money in an IRA is smart, he said, "however, whether its smart to put it into the stock market, is problematical."
Investing in an IRA under certain conditions, Daniel said, could make taxpayers eligible for retirement contribution credits.
"Probably for low income families," he added. "(Utilizing) the IRA as a tool (would be beneficial) to really manage the return."
As for small business owners, especially in the Michiana area, who have been hit hard by the economic downturn, Daniel's advice was almost cautious. "I would say the general rule is, use the same basic approach you always do."
There are not many differences in filing or credits this year for small business owners, Daniel said.
But, he said, professionals might be able to identify areas that owners could take advantage of to save themselves some money, such as ways to slow down depreciation, better recognize inventory and capitalize on different things.
And then there's the worry on the shoulders of those who may find themselves having to pay up.
"For those who owe money, they don't have and don't want the IRS chasing after them," Daniel said. "File an extension."
The IRS will not begin collection activities until you file the ruturn, he added. You can reduce the amount of penalties and interest you will incure, if you file an extension. Or, you can ask for an installment agreement and offer to pay a certain month each month.
Extensions must be filed on or before April 15. Taxpayers will automatically have until Oct. 15. "Go ahead and pay them the money as fast as you can," Daniel said. Then, file the return. "That will slow the IRS down." And he added, start with state taxes first.
For those still unsure of what to do -ask questions of a tax professional, Daniel suggested. And go to someone you trust.
Daniel, owner of Quality Tax Service, operates his office at 1935 S. 11th St. in Niles.