l and state taxes approaches, Deputy Commissioner of Revenue Marian Davis and Director of Individual Income Tax Division Bonnie Lee sat down with State Journal Staff Writer Hillary Canada to talk about pitfalls and changes to watch for while preparing taxes.
The filing deadline is a little different this year. When is it?
Davis: It is different, its April 17th this year.
What accounts for the difference?
Davis: The weekend.
What are the advantages to filing early?
Davis: If you file early and youre getting a refund you get it that much quicker.
Is there any kind of last-minute rush? A local tax preparer told the Buyers Guide that the last-minute rush has been decreased because of improved technology.
Davis: Probably not true. Its still very busy, its still very hectic.
Is there a greater number of people who file in January now because of improved technology?
Lee: Jan. 15 through the end of February we get a large group and then it slows down a little bit during March and then we get the rest of them in April.
So if people decide to file within the next week or so, when could they expect to get their returns?
Davis: Seven to 10 days if they file electronically and if they file through the mail it will take longer, four to eight weeks.
Is direct deposit available for returns?
Davis: Yes it is.
What do people need to include on that?
Davis: Bank information, probably a tracking number for their bank.
Lee: And they need to file electronically.
What are the most common mistakes that people make when theyre filing?
Davis: The math always needs to be checked. Thats the one area you would need to check. Signing their return, attaching W2s. Probably the most simple mistakes are the most common.
So you think people should check their math on a separate piece of paper and then go back and fill it in?
Davis: Oh, I think its always good to check it or maybe have someone else check it for you. Thats what I would do if I were doing it. If you file electronically do not send a paper return. Thats important because thats confusing.
What happens then?
Davis: Well, it can cause duplication and slow things down and maybe cause confusion for the taxpayer later on.
Are there state resources available to help people while theyre preparing taxes? Is there a Web site that you could direct them to?
Davis: Yes. Yes there is a Web site. That is revenue.ky.gov.
Is it worthwhile for people to have professionals prepare their taxes?
Davis: In certain cases it would be.
What kind of cases?
Davis: If you have complicated taxes, if you have businesses or that kind of thing that would be more complicated than just I have a job and I pay taxes.
How long should people keep receipts after their filing is complete? Should they hold onto them in case theres a problem?
Davis: Five years in most cases. If its something that you might need to look at later on such as repairs to a home or that kind of that thing that you might need to use over a period of time or a longer of time if you were to sell the home.
The Earned Income Credit is something the government Web site is encouraging people to take advantage of. Are there many credits out there that people dont know about that maybe they could get in on?
Davis: Probably not a lot but some and that might be one of them.
Lee: The Earned Income Credit is a federal credit so its only available on your federal return. But it is something that individuals with children and some single people who maintain their own home are eligible for. We have a family-size credit that is dependent upon the number of people in your family and your income levels and its graduated. Thats new this year so thats something that people ought to review.
We also have a new credit for education which is a percentage of the federal credit for education and lifetime learning and its 25 percent of that credit if you go to school in Kentucky and if youre an undergraduate.
Did you say thats just starting this year?
Lee: Thats new this year.
What kind of recommendations do you have for people as theyre getting ready to file? What should they have ready for them when they go to the computer?
Davis: Be prepared. Get your paperwork together and all your receipts and things that you could itemize. Have all that with you, and make a checklist and review it to be sure that youre doing everything that you should do.
Is there anything else that you want to add?
Davis: The one thing that we could add is that we truly encourage you to file electronically. Its much more efficient for the taxpayer and much more efficient for the commonwealth. The savings for the commonwealth are significant and that would be an important factor.
How do electronic returns differ from paper returns?
Davis: Well cost-wise, it costs about $1.60 more or less to file a paper return. To file it electronically its about 9.5 cents.
What does the cost of paper returns include?
Davis: The savings include the processing, the opening of the mail, the sorting of the mail, the employees, and the time that it takes.
Lee: If it comes electronically all of thats there and we have to create that electronic record from the paper returns so thats where that cost is incurred.
Davis: Its much easier to store.
So theyre all stored on site. Do you have a server that keeps track of peoples tax records?
Lee: Oh, yes. Either paper or electronically, but we also have to physically store the paper returns so that costs us some money too to maintain that storage and maintain the files.
Davis: Its a lot more efficient to maintain that information electronically and its better for the taxpayers as well because they have that information to work from the next year when theyre preparing their taxes.
Are there any kind of risks associated with filing electronically?
Lee: You mean from our standpoint?
Yes, or from home?
Lee: If there is a problem it can be rejected and you can resubmit. But you can go online and select a preparer or a software company. If youre under a certain level of income you can file for free. They will help you prepare it and file it for you for free or theres a very small expense $10 to $15 I think usually to file both your federal and your state. So its an easy way to do it yourself or you can go to a preparer and have him prepare it and file it electronically for you.
How quickly could someone be notified of a mistake in their returns? How does that work on your end?
Lee: If its electronic, mathematically it will be accepted by the federal government and then we get it because it requires that you file with the federal and state. Once its been accepted by us then youre pretty well assured that its okay. If there is a mistake we will pick up on it.
If you file a paper return, you have to wait until someone enters all of that data and then it goes through those processes and so it would take much longer to find out you made a mistake on a paper return.