Another Tax Season has come and gone. Here are the 5 Lessons Learned from this Tax Season.
1) Don’t Pass Tax Legislation on December 31
Congress passed the American Taxpayer Relief Act on December 31, 2012. It’s clear that no one voting on it read it, much less understood it. The timing of this legislation was not good. Due to the late passage of this bill the IRS was delayed with approving the tax forms. This naturally delayed the filing of many tax returns.
2) Do Return Your E- File Signature Authorization Form 8879
With few exceptions individual income tax returns need to filed electronically. For a CPA to do this they will need their clients written approval. This is done on IRS Form 8879. The return cannot be filed until this signed form is received by the CPA.
3) Don’t be Surprised When You Show Up Late That You Are Put On Extension
As you know, individual income tax returns are due on April 15th. If you can’t get your return completed by this day you will need to file for an extension. The extension will extend the time to file the return until October 15th. It will not extend the time to pay the tax.
4) Don’t Buy Limited Partnership Interests If You Don’t Know What You Are Buying
This past year purchasing limited partnership interests were attractive to many due to the yield. That’s fine. It’s quite clear however that many people are unaware of the tax reporting on these partnerships. A partners profit or loss is reported on Form 1065 K-1. Believe it or not, these are not due to be filed until April 15th. Right, that’s the same day as the personal income tax return. Therefore if you are going to purchase a partnership with K-1 reporting, be prepared for delays in receiving your tax documents.
5) Be Prepared To Pay Higher Taxes In The Future
It appears that many taxpayers are frustrated with the income taxes they are paying. For the upper income taxpayers we tell them to get prepared for higher taxes in the future. The American Taxpayer Relief Act raised taxes on these taxpayers. Additionally, the Affordable Care Act also known as Obamacare also increased income taxes on these taxpayers.
What did you learn from this past Tax Season?
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