The effects of the recession on consumers were more than apparent during this past federal income tax filing period. As April 15 approached, various entities were reporting that the number of taxpayers filing returns was well below previous levels, extension requests were high and those asking for more time to pay their taxes were soaring.
In early April, the IRS reported that the number of returns filed was down nearly five percent compared to the comparable period last year.
At the same time, the number of taxpayers filing for extensions spiked. FileLater, which offers online extension filings, said it filed more extensions through March than it did all of last season, and was receiving five times the traffic on its Web site in the days leading up to April 15 compared to the prior year.
The IRS is yet to release data on this year’s tax period trends, but local tax preparers say they did see a little more taxpayer worry and concern this year. However, it seems that Mississippi taxpayers were a little better prepared and informed than others around the nation.
“They were edgy,” said Bernette Brown Smith, owner of B&B Tax Services in Jackson. After a pause, she added, “Well, let me say that in the end, as April 15 came, there was worry. In the beginning, it was pretty much like it always is. Those that had money coming back just wanted to get their taxes filed so they could get their return — like it is every year.”
Smith said she did approximately 60 extensions this year, which was up from previous years.
“I really don’t know why,” she said. “They just didn’t seem to be ready, for whatever reason. It was probably just procrastination.” Of those who were late but did not request an extension, she said with a laugh, “I guess I kind of gave them a little worry in that I don’t do taxes on the fly. If they weren’t ready to file their returns or an extension, I couldn’t help them.”
Frances Sanders, administrative assistant with Banks Finley White & Co., also of Jackson, said her company did not really see much out of the norm during the past filing season, other than one nuance that was a good thing for filers.
She said new tax credits and deductions, and the fact that many taxpayers made less money last year, decreased the tax burden on a large number of filers.
“We had some clients who called, like they do every year, wanting to know what their status was — do they owe or are they getting money back,” Sanders said. “And, some were surprised to learn that they owed less or actually had money coming back.”
There was concern going into the filing season amongst tax preparers that filers would be confused over new tax credits and other changes. They were not the only ones worried. The IRS also had concerns.
“By better mining and interpreting…information, we can tailor services to taxpayers and address concerns,” said Doug Shulman, commissioner of internal revenue, speaking to the National Press Club April 13. “We also have to address one of the big transformational shifts I touched upon earlier: tax preparation. Today, 84 percent of taxpayers are using a paid tax preparer or software to complete their returns. And we know the reasons. Tax law complexity. Tax laws that constantly change. And, tax returns that take too long to fill out.”
A survey by The Tax Institute at H&R Block, released in early April, found general confusion amongst filers. As example, of the 1,001 taxpayers surveyed, 80 percent did not whether unemployment benefits were taxable, a rather shocking finding considering how many Americans are jobless. And, more than half (55 percent) of taxpayers were unaware that being granted a filing extension did not buy them time to pay their taxes.
“The results are alarming because taxpayers could be missing hundreds of thousands of dollars by not knowing how to claim the appropriate credits and deductions on their returns,” said director of The Tax Institute Amy McAnarney. “In this tight economy, taxpayers need to make sure they are getting all their entitled.”
Neither Smith nor Sanders said they observed any more confusion over previous years. Smith said taxpayers looked to her as the expert. They just wanted their return completed on time and accurately.
Sanders said, “Every year, we have those who are going to file by April 15, and a group that is always going to ask for an extension. We’ve been doing their returns for 20 or 30 years, and that is always the case. If they had questions, they asked their accountant, just like always. I really didn’t see a lot of concern or worry.”
Contact MBJ staff writer Wally Northway at firstname.lastname@example.org.
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