OK, so the holidays are over. Time to relax and breathe, right? Maybe put that new mack-daddy tent you got for Christmas to good use, or start the year with some artery-unclogging cardio as part of your New Year’s resolutions.
Well, don’t get too comfortable. The Biz knows you’re just coming off the holidays and the last thing on your mind right now is taxes—heck, you’re probably still stressing out over post-holiday debt (see “The Biz,” Dec. 19, 2007). Unfortunately for you, the Internal Revenue Service doesn’t really care. So unless you’re one of those fringe folks who still swears up and down that federal income taxes are illegal, listen up. Mark Hanson, the IRS’ spokesperson here in North Carolina, has been passing along tax tips, and between now and the ominous April 15 filing deadline, The Biz will be sharing them. Let’s start with the basics:
Seven Ways to Get a Jump on Your Taxes:
Earlier is better—especially if you’re self-employed or run a small business where you might miss a whole host of deductions if you’re in a rush.
1. Gather your records in advance. Make sure you have everything you need, including W-2s and 1099s. Don’t forget to save a copy for your files.
2. Get the right forms. They’re available around the clock at www.IRS.gov, the IRS Web site.
3. Take your time. Don’t forget to allow for coffee breaks when filling out your tax return—rushing increases the likelihood of making a mistake.
4. Double-check your math and verify all Social Security numbers. And before you say “Duh!” consider that these are among the most common errors found on tax returns, Hanson notes. Taking care will reduce your chances of hearing from the IRS.
5. E-filing is easy, says Hanson. It catches math errors, confirms that your return has been received and expedites your refund.
6. Speed up your refund. E-filing early helps, as does choosing direct deposit.
7. Don’t panic. If you have a problem or a question, try the IRS Web site (WWW.IRS.gov) or call IRS customer service at (800) 829-1040 (though based on The Biz’s experience, by all means try the Web first. The closer it gets to the deadline, the more akin to a miracle it becomes to reach an actual human being at the IRS).
Choose the Right Filing Status:
Your federal filing status is based on your marital and family situation. It’s an important factor in determining whether you must file a return, your standard deduction and the correct amount of tax.
Your marital status on the last day of the year is what counts. If more than one filing status applies to you, you may choose the one that gives you the lowest tax bill. There are five filing-status options:
1. Single: Generally, if you’re unmarried, divorced or legally separated according to state law (in North Carolina, a couple need only be living apart to be legally separated), your filing status is single.
2. Married Filing Jointly: If you’re married, you and your spouse may file a joint return. If your spouse died during the year and you did not remarry, you may still file a joint return for that year.
3. Married Filing Separately: Married taxpayers may elect to file separate returns.
4. Head of Household: You generally must be unmarried and must have paid more than half the cost of maintaining a home for yourself and a qualifying person.
5. Qualifying Widow(er) with Dependent Child: If your spouse died during 2005 or 2006, you have a qualifying child and meet certain other conditions, you may be able to choose this filing status.
For more information about filing status, see publication 501, “Exemptions, Standard Deduction, and Filing Information,” available on the IRS Web site or by calling (800) TAXFORM. (Note: If you qualify for more than one filing status, it would be wise to consult a tax professional to determine which is most advantageous).
Should You File a Tax Return?
You must file a tax return if your income is above a certain level. The amount varies depending on your filing status, age and the type of income you receive, says Hanson.
For example, a married couple both under age 65 generally is not required to file until their joint income reaches $17,500. But self-employed individuals must generally file a tax return if their net income from self-employment was at least $400.
Check the “individuals” section of the IRS Web site, or consult the instructions for form 1040, 1040A or 1040EZ for specific details that might affect your need to file a tax return this year.
Don’t have to file? Great! But don’t be a putz and leave money on the table, either. Even if you don’t have to file, you should file to get money back if federal income tax was withheld from your pay, or you qualify for a refundable credit that could give you a refund even if you don’t owe any tax. Refundable credits include:
• Earned Income Tax Credit: Available to eligible low-income workers, it reduces the amount of tax an individual owes and may be received in the form of a refund.
• Additional Child Tax Credit: You may qualify for this if you have at least one qualifying child and you did not use the full amount of your Child Tax Credit.
• Health Coverage Tax Credit: This is limited to certain individuals who receive specified Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or payments from the Pension Benefit Guaranty Corp.
• Freeze assistance: Small-business owners in most Western North Carolina counties who suffered losses from the Easter freeze have until Jan. 24 to apply for federal economic-injury loans through the U.S. Small Business Administration.
The deadline applies to small-business owners in Buncombe, Haywood, Henderson, Jackson, Macon, Madison, McDowell, Polk, Rutherford, Swain and Transylvania counties.
The SBA disaster loans are available to farm-related and nonfarm-related small businesses and small agricultural cooperatives that suffered a financial loss as a direct result of the Easter freeze. Eligible small businesses may qualify for loans of up to $1.5 million. The loans are available at 4 percent interest with terms of up to 30 years.
Interested business owners should contact the SBA’s customer-service center at (800) 659-2955 Monday through Friday between 8 a.m. and 9 p.m. Visit www.sba.gov to download loan applications. Completed applications should be mailed to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Forth Worth TX 76155.
• Local company on growth path: CPU2, a locally owned and operated logistics-and-teleservices company, and the Economic Development Coalition for Asheville-Buncombe County have announced plans to expand the company’s operations near the Brevard Road/Long Shoals Road intersection.
In connection with new contracts with nationally known beauty-and-wellness brands, the facility, which currently employs 350 people, will hire an additional 60 to 75 employees to provide fulfillment and customer-care services.