Ted Simons: It's time once again to file your state and federal tax returns, but before you send them off, you might want to check out what our next guests have to say. I recently spoke with Anthony Forschino of the state department of revenue, and Bill Brunson of the internal revenue service about recent tax law changes and tips that can help you with your tax return. Thank you so much for joining us tonight on "Horizon."
Ted Simons: we got a few extra days this year --
Bill Brunson: three.
Ted Simons: How did that work out? Just calendar?
Bill Brunson: Kinda sorta. The district of Colombia has a federal holiday that affects tax laws, so it falls on a Friday, which then pushes the 15th date to Monday, April 18th. So folks have three additional days to file and pay any taxes due. There's also a change in the extension due date. Normally that falls on October 15th, it's going to fall on October 17th because it falls on a Saturday, a non business or banking day, gets pushed forward to the next Monday. So people have three additional days this year to submit and pay any tax.
Ted Simons: Let's talk about some other changes here. In Arizona, we've got this, I didn't pay enough fund. What's that all about?
Anthony Forschino: It's a new check-off. We've always had lots of check-offs where you can check off, give to the wildlife fund, or whatever. This is a new check-off which means you can give part of your refund or actually pay some money into it, it's, I didn't pay enough fund. If you check it and give money, it goes to the general fund.
Ted Simons So the lawmakers can do whatever they want with your refund.
Anthony Forschino: Yes.
Ted Simons: And I'm supposed to check that.
Anthony Forschino: Please, check it. We need money.
Ted Simons: OK. Standard deduction, now, correct me if I'm wrong, same for Arizonans, but different for out of state folks?
Anthony Forschino: Two things. It's -- the standard deductions remaining the same for Arizona taxpayers, and usually is increased each year by an index. This year the index, the consumer index went down, so it stays the way it was. The change for nonresidents is that they used to get a full standard deduction on their returns. What's happening now is they have to prorate it just like they prorate their income, they prorate their deduction.
Ted Simons: One more thing, it's a private school tuition tax credit. That's interesting in that the dates, you can do it now and still apply it then?
Anthony Forschino: What's changed this year is that you can give between January 1st and April 15th, an elect to take it in the prior year.
Ted Simons: OK. Back to the federal side now, what is the IRS free file? It.
Bill Brunson: allows all Arizonans to submit online through the IRS's website, their tax return. So everybody can file electronically online through IRS.GOV by clicking on the "free file" icon. There's two forms, traditional free file, which is based on $58,000 or less of income, and then there's fillable forms. But it allows all Arizonans to submit your tax return on online for free.
Ted Simons: Wow. Interesting. The earned income tax credit, again, I think -- it confuses a lot of folks. What -- even the title is confusing. Tell us what this is.
Bill Brunson: Basically for workers who work and don't make a lot of money, $49,000 or less. You can have children or not have children on the return that you're feeling, it will cause a refund, increase the refund, or reduce the tax liability, moneys that you owe. You have to file a tax return, you have to have a valid social security number, have earned income, and that's pretty much it. If you earn around $49,000 or less, it's money that is there for people who are in that tax bracket or that area.
Ted Simons: There's also a payroll tax cut that changes a little bit here? What's that all about?
Bill Brunson: 2% from 6.2 to 4.2 on social security taxes withheld on wages paid to the worker, so that over the course of the year if you earn $50,000, then you'll see a small portion of that reduction in each pay period, which will equate to a thousand dollars out of $50,000 salary. Now, will this affect your social security benefits later on? No, it will not.
Ted Simons: It won't?
Bill Brunson: It will not. So this year folks will see a minor change in the income if as a wage earner, and it's based on a maximum of $106,800. And that's where social security taxes stop for the worker.
Ted Simons: Unemployment compensation. What's changed there?
Bill Brunson: 2009, the first $2400 was not includable in your income. 2010, unemployment compensation, all of it is includable in income. That's the way it was in prior years. And it is subject to tax. And some people have withholdings, some people don't. But this year in 2010 if you received unemployment compensation, all of it goes on the return.
Ted Simons: All right. Arizona did not adopt some federal provisions. Correct?
Anthony Forschino: Last year. What happened was the Arizona didn't adopt the $2400 deduction for unemployment, so they had to add it back. To be taxed in Arizona, there was the -- there was a deduction for -- sales tax paid on new vehicles that was not taxed for federal, had to be added back in Arizona. That only affected the 2009 year. However, people are needing to file an amended return if they had already filed their 2009. The department has created a form that they can apply -- they can file their amended return by October 15th of this year, and they will have no penalty and interest on the additional tax.
Ted Simons: OK. Withholding rates, changes there?
Anthony Forschino: Yeah. What happened was, last year, July we changed our withholding rates to break away from the federal government. We were a percentage of the federal. We broke away from that and have our own percentages. That started in July of last year. This year in January we created a new form, same percentages that were in July but we've created one more lower percentage for taxpayers.
Ted Simons: Am I to understand the IRS is now gotten into the smart phone app business?
Bill Brunson: Exactly. Individuals can download for free from the Android marketplace or the apple App store an -- app store, an application for their smart fund that will allow them to check on their refund 72 hours after they file it. They can also get tax law updates. If you have a smart phone, you've electronically filed your tax return, 72 hours later you can check to see where that money is at.
Ted Simons: And we should by now, as of this week, we should have our W-2s, right?
Bill Brunson: January 31st was the due date these items are to be made available to the taxpayer, which generally means they're mailed to them. So if you haven't received that W-2 or that 1099 information return, go to the source, ask that it be provided to you. And if you don't, then you can talk to the IRS and we'll work with you as well the issuer and make sure you get this idea or substitute and file on time.
Ted Simons: In these times of economic, just craziness out there as far as jobs are concerned, what do you tell folks who see their incomes changes radically? They get a job, they lose a job, that kind of thing. What advice -- things to watch out for out there?
Anthony Forschino : Not really. I don't know that -- there's nothing really to look for in tax purposes. Hopefully everybody who's got a job or didn't get a job I don't know is still getting the withholding the same way and not having to worry about paying at the end. That's very important that you don't -- don't start to think you should reduce your withholding and then you end up with a big in April.
Ted Simons: I guess that's my point. Some folks do that, they think withhold can stays the same, but it could really mess things up.
Bill Brunson: It changes on the fact of circumstances of the individual. But if an individual has a payment arrangement with the internal revenue service and they are experiencing financial difficulties, we can hold up a payment so that they can skip it, or we can reduce the payment, or we can put it in a hold status for them. It just depends upon them -- the individual communicating with the IRS on the this issue, if they are on a payment arrangement.
Anthony Forschino: The state is in the same situation. We have our collection have held payments up and based on hardship.
Ted Simons: All right. Very good, gentlemen. Thanks for joining us. We appreciate it.