The end is near: Tax filing deadline looms Monday
April 12, 2013
Frequently asked tax questions among the top searched by taxpayers and H&R Block tax professionals.
1. I am in the military and stationed in a different state than where I usually live. What state tax returns do I need to file?
Taxpayers file where they “live” and not necessarily where they are “stationed.” If the only reason a military member lives in a particular state is due to active duty status, then the original “home” state should be used for filing purposes.
2. I negotiated with my credit card company to cancel my debt. How do I know if I am eligible to exclude that from my income?
Income from the cancelation of personal credit card debt is not excludable income. Generally, when a debt is canceled, that amount must be reported as income on a tax return. Exceptions include debt canceled as a result of insolvency or bankruptcy. Through 2013, the Mortgage Debt Relief Act makes some taxpayers eligible to exclude canceled debt from foreclosures.
3. Do I owe penalties if I took a hardship distribution from my 401(k)?
Unless a penalty exception is explicitly stated in tax code, financial hardship is not an exception the penalty. Generally, there is a 10-percent early distribution penalty when money is withdrawn from a 401(k) before the holder is 59 ½. Some exceptions include if the distribution is made to beneficiaries after the account holder’s death, if the distribution is because of total and permanent disability, or if the distribution will pay for tax-deductible medical expenses.
4. Who is responsible for paying a deceased taxpayer’s taxes?
The deceased taxpayer’s estate is responsible for paying the taxes and the executor of the estate is responsible for making sure a tax return is filed. Federal taxes due generally must be paid before all other estate debts. If the executor pays other debts first and there isn’t enough money left to pay the taxes, the executor could become personally responsible for the taxes.
5. If I take online classes, can I claim education tax breaks? What if I used money from a trust to pay the tuition?
Students who take online courses from any college, university, vocational school or other post-secondary educational institution eligible to participate in a student-aid program administered by the Department of Education can. Individual institutions should be able to tell students if they are eligible institutions. If tuition is paid with money from a trust, education tax breaks can be claimed as long as the other eligibility qualifications are met.
With the approach of April 15, some people are making their annual trip to accountants and the post office in a rush, while others filed early to be aware of legislative changes to tax guidelines, according to local tax offices.
"We're so slammed right now," said Kimberly Carroll, franchise owner of Liberty Taxes at 843 Sutton Way in Grass Valley. "The last week gets really crazy every year. People are panicking now."
In addition to a busy filing week, Carroll also said she has seen a few extensions and anticipates several more in the next few days, especially with small businesses.
"We do it electronically through IRS.gov," she said. "There are a lot of walk-in appointments one after the other. I'm booked through Saturday."
One of the possible causes for the late filing is the late start of the tax season, which was two weeks later than usual, said Gene King, spokesman for H&R Block.
"Plus there were a lot of forms that weren't available, so people couldn't file until mid-February to March," King said, adding that there were about 1,100 changes to federal and 4,400 changes to state tax codes across the country.
"This is a tax season like no other."
Some offices speculate that people wanted to know their situation in light of all the changes and made efforts to file earlier.
"It's been just as busy as usual, just more steady since more people are concerned this year, trying to get it in early and make sure of everything," said Linda Wheeler, co-owner of Business Matters at 431 Crown Point Circle in Grass Valley.
"Last year I had a lot of people who owed money and it's been better this year, with the same number of customers."
Wheeler said she worked late hours last year but was spared of that necessity this year.
"I've been able to leave at regular time, which is more pleasant," she said.
Local post offices will retain their normal business hours, according to Dan Lovell, postmaster at the Nevada City post office on Coyote Street.
Grass Valley post office at 185 East Main St. will also operate their regular hours of 8:30 a.m. to 5 p.m. Monday. According to usps.com, the closest post office open late is in Colfax, located at 3181 Iowa Hill Road, which will be open from 10 a.m. to 8 p.m. Monday.
For the latest of late filers, Lovell said a West Sacramento post office, locate at 3775 Industrial Blvd., will be open until the 11:59 p.m. filing deadline.
Visit IRS.gov for more information.
To contact Staff Writer Jennifer Terman, email firstname.lastname@example.org or call 530-477-4230.