Less paper equals cash for employers

OLYMPIA – Electronic tax filing is saving thousands of dollars for employers and the Employment Security Department.

Since 2008, the number of paper filers has been cut in half as more employers move to e-filing, the agency said last week. About 15 percent of employers still file by paper.

Because e-filing prevents many reporting errors, penalties for errors are down more than 20 percent from two years ago.

 Employment Security also benefits, as e-filers saved the agency an estimated $650,000 in printing and postage costs last year.

Employment Security’s most-commonly used electronic filing program allows department tax specialists to log in and assist employers in filling out their tax forms, helps employers avoid filing errors and maintains historical filing information so it doesn’t have to be re-entered every quarter.

Of those businesses still filing by paper, about 94 percent are small businesses with 10 or fewer employees. The construction industry has the highest number of employers still filing by paper – more than 5,000 construction companies, or about 17 percent of the industry.

Employers that want to make the switch can find more information online at www.esd.wa.gov.

Survey seeks ideas for simpler state tax code

Washington state officials want some help in finding ways to simplify the tax code for small business.

A new online survey at the Department of Revenue’s website is part of a larger effort started by Gov. Chris Gregoire. She’s asked new Revenue Director Suzan DelBene to recommend ways of simplifying the tax code and reducing administrative burdens on businesses. DelBene says complications include state and local gross-receipts taxes, and different sales tax rates in different parts of the state.

The survey can be found at dor.wa.gov/TaxSimplification. The Revenue Department is presenting its recommendations to Gregoire at the end of June.

Tax forms available through Coeur d’Alene library

Taxpayers looking for state and federal forms can access them online at the Coeur d’Alene Public Library or from the library website, www.cdalibrary.org.

The library discontinued providing copies of forms several years ago to reduce paper waste.

Federal tax forms can also be downloaded at: www.irs.gov. State tax forms are available at http://tax.idaho.

Hard copies of federal tax forms and other tax publications can still be obtained at the IRS office in Coeur d’Alene, 1221 Ironwood Drive. Call (800) 829-1040. Idaho state forms can be requested by mail by calling (800) 972-7660.

AMT rules can be perplexing

Each year, the Alternative Minimum Tax seems to threaten a larger segment of middle class taxpayers.

Conceived by Congress as a method to prevent people with high incomes from using special tax breaks to avoid higher taxes, AMT income requirements and deduction rules can be perplexing.

These websites help explain what this tax is:

• Bankrate.com: Covers tax rates and deductions affected by the alternative minimum tax. www.bankrate.com/yho/itax/Edit/ tipstories/alternative_tax.asp

• Fairmark: Guide to the basics and aspects of the AMT. www.fairmark.com/amt/

• Internal Revenue Service: Provides a brief overview of the AMT, with links to relevant instructions and forms. www.irs.gov/taxtopics/tc556.html

• Investopedia: Discusses ways to reduce the AMT bite. www.investopedia.com/articles/ pf/07/amtbasics.asp

• Investorguide.com: Explains the AMT and red flags to watch out for. www.investorguide.com

Watchdog denounces IRS liens

A government watchdog says the Internal Revenue Service is tormenting struggling taxpayers in the midst of a slumping economy by increasing the number of liens the agency has filed against people who owe back taxes.

The IRS filed nearly 1.1 million liens in the budget year that ended in September, a 14 percent jump over the previous year. National Taxpayer Advocate Nina E. Olson says the liens punish taxpayers and often hurt their ability to pay back taxes.

The IRS responded that liens are not filed until taxpayers are given numerous opportunities to pay their tax bills, or sign up for payment plans.

IRS spokeswoman Michelle Eldridge said the agency has taken numerous steps to help taxpayers facing financial problems, including increased flexibility in installment agreements and other collection efforts.

Some credits, deductions could trip you up

Did you buy energy-efficient windows for your home last year? You can only take the energy efficiency credit if they were installed by Dec. 31.

That’s just one of the details that could trip up taxpayers filing 2010 returns.

Want to take the first-time homebuyer credit on your taxes? If you bought your house after April 30, or didn’t have a binding contract by that time, you’re probably out of luck. Was closing delayed? Depending on how long, you might not be eligible.

If you deducted the first $2,400 of your unemployment benefits last year, be aware that you can’t do it again this time around. Congress didn’t extend that tax benefit.

Some experts advise taxpayers to seek help preparing their returns, either from a professional tax preparer or by using tax preparation software, especially with the late changes Congress made to the tax law. Some benefits were extended; others were allowed to lapse.

One source of information is the IRS’ tax guide for individuals, Publication 17. Running over 200 pages, it’s filled with information on credits and deductions, and how to figure your tax and file your return.

Other tax tips

• Charitable deductions. You’ll need a bank record, such as a canceled check or a receipt, even for the smallest donation. That means that if you gave $1 in cash to the Salvation Army bell ringer over the Christmas holidays, you can’t claim a deduction without a receipt. For donations of motor vehicles, get a completed Form 1098-C or similar statement from the organization and attach it to your return.

• Out-of-pocket expenses for teachers. Congress restored the deduction of up to $250 for teachers. It applies only to full-time teachers from kindergarten through high school.

• Conversion of traditional IRAs to Roth IRAs. You’ll have to decide whether to include the value of the conversion as income for 2010, or split it over two years, 2011 and 2012.