We’re almost three weeks into the new year, but people are already seeing their accountants to file their taxes.
“They want their refunds now. They want it early so they can get their money in and we’ll probably see quite a few more people file early this year because of the hard times,” says certified public accountant Richard Osborne.
Last year, the average refund was just over $2,400. E-filing makes the process of getting your refund even easier. Taxpayers can start filing their taxes electronically now. The California Department of Revenue’s website has a list of free e-filing vendors. Certified public accountant William Healey says there are a couple silver linings to all of this, particularly if you’ve lost your home to foreclosure.
“It’s called cancellation of indebtedness or forgiveness of debt. Ordinarily that’d be taxable income but because that’s like throwing salt into an open wound there’s provisions that have come into the law that if you meet them you’re going to be able to avoid paying tax on the amount that’s being forgiven,” Healey says.
You also may have heard about a new tax break for IRA’s and pension plans.
“If you’d otherwise be required to take a distribution in 2009, now you’re exempt from doing it so basically you’re going to get a free pass for 2009. You don’t have to take out the minimum distribution, which means people won’t be taxed on it and they don’t necessarily have to sell something in their portfolio at a bad time,” says Healey.
So, what if you do have to pay Uncle Sam?
“The most important thing is communicating with the IRS, get the returns filed and let them know you’re working with them. The worst thing you can do is ignore them,” Healey says.