January 31, 2015

Tax time already? Tips on finding a solid preparer

IRS LogoSome Nebraskans are already starting to work on their state and federal tax returns.

If you want to hire a tax preparer this year, IRS spokesman Bill Brunson says it’s vital that you get someone who knows what they’re doing. Brunson offers a few tips for selecting a tax preparer:

“Make sure that you go to one that is ethical, who will be around after the filing season in case you get a letter from the IRS in your mailbox,” Brunson says. “Make sure that they’ve gone back to the schoolhouse and learned about the current tax law so they can provide you benefit from it.”

Brunson says you should be concerned if the tax preparer makes big promises without first knowing your situation.

“A good tax preparer is going to ask you a lot of questions and ask you for your receipts and documents,” Brunson says. “A bad preparer will say to you, ‘Hey, I can get you a large refund,’ without running any numbers through the form. Or they might say, ‘I am only going to charge you a percentage of what I can get back for you.’ Those two items are red flags. You don’t want to go to those folks.”

He says there are steps you need to take to protect yourself, no matter who you have do your taxes.

“You never want to sign a blank return. You always want to review your return before you sign it. You are legally responsible for that information reported to the IRS, even though someone else prepared it,” Brunson says.

For more information on filing your taxes, go to www.irs.gov.

 

New report shows rural Nebraskans pay more in taxes

The OpenSky Policy Institute released a report today that shows rural Nebraskans pay more property and income taxes on a per-capita basis than those living in urban areas.

Executive Director Renee Fry says, “Although income taxes paid in rural areas are lower, property taxes there are higher so that rural residents pay more when both taxes are combined.”  

The report shows that using data from 2012, rural Nebraskans paid more than $1,000 more per person than their urban counterparts – a difference of nearly 40%.

The analysis shows the skyrocketing value of Nebraska’s farm and ranch land has contributed to this growing imbalance. The report shows from 2003 to 2012, agricultural land saw a 116% increase in value for tax purposes while commercial and residential property each increased 45%.   

Fry noted that the tax imbalance already has created problems regarding fiscal issues like school funding.

Nebraska Farm Bureau declares state tax system broken

HarvestThe Nebraska Farm Bureau has issued a challenge for the new governor and the new legislature: reform the state tax system.

Farm Bureau Vice President Mark McHargue of Central City says the property tax is becoming an increasingly heavy burden for farmers.

“The effect on the bottom line for our members is growing, it’s substantial,” McHargue tells Ken Anderson with Brownfield Ag News. “For some of our ranchers, it’s the biggest check that they write in their operation in a given year.”

The Farm Bureau has declared the state tax structure and school funding system broken. It says a fix is needed.

McHargue says the time for change is right, because a new governor and a new legislature take office next month.

“We are optimistic that we really have a chance here maybe that we haven’t had for a lot of years to actually get some meaningful reform done,” McHargue says. “It’s not going to happen in one year. It’s still going to be a long-term process. But I think the initial steps that we need to take are real positive that we can get that done this year.”

According to the Nebraska Farm Bureau, though farmers and ranchers make up only about three percent of the state population, they pay about a quarter of the property tax collected by the state.

The Farm Bureau says the state must restructure its tax system to find a better balance to fund local obligations, including schools.

Ken Anderson, Brownfield Ag News, contributed to this report.

Study: Tax credit is big bonus for rural Nebraskans

A study finds a federal tax credit that targets low-income working families is especially important in rural areas in Nebraska and nationwide.

Jon Bailey, at the Lyons-based Center for Rural Affairs, says the Earned Income Tax Credit is focused on putting more money in the pockets of people who have jobs and who make less than around $50,000 a year.

“This is another anti-poverty, poverty alleviation program that more people in smaller areas, rural and small town areas, take advantage of,” Bailey says.

The gap between rural areas and urban areas is growing, he says, so more people will be needing to use the Earned Income Tax Credit when they do their federal taxes.

“This is something that is always something somebody should look at when they’re doing their federal taxes or have whoever does their taxes look at to see if they qualify,” Bailey says, “It’s been proven to be a very effective program for low-income taxpayers.”

The center’s study finds the higher use of the tax credit tracks alongside other economic indicators which show many rural families are still struggling financially.

“It has not only the effect of alleviating poverty for a lot of people,” Bailey says, “but it also acts as an economic stimulus so people go out and spend that money which then has the multiplier effect throughout the economy.”

The center’s report found the number of people who claim the credit is less than 19 percent in metropolitan areas versus more than 21 percent in rural areas and small towns.

Bailey says the increasing importance of the credit to working families should send a message to federal policy makers to consider expanding its reach, making more people eligible.

Drought-stricken livestock producers get a break from the IRS

CowsA policy change by the Internal Revenue Service gives Nebraska farmers and ranchers who were hit by drought more time for recovery.

IRS spokesman Christopher Miller says the agency has changed the rules when it comes to livestock losses.

Miller says farmers often sell off more livestock than usual during a drought and in order to take advantage of tax benefits under the law, they have to replace those livestock within a specified time.

That time limit had been four years, but the IRS has extended the deadline another year for those who were facing a December 31st deadline this year.

“That also means that impacted farmers can defer taxes on capital gains from that sale of the livestock,” Miller says.

The IRS regulations say the one-year extension applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes due to drought. Sales of other livestock, like those raised for slaughter or held for sporting purposes, and poultry are not eligible.

Miller says the overall goal is to provide a break to farmers who were impacted by the drought.

“You will have an extension of time to replace the livestock that you had to get rid of because of those conditions,” Miller says, “and you also have an extension of time to defer any taxes that you get because of the gain in selling that livestock.”

Miller urges Nebraskans to check to see if they qualify under the extension. They need to read IRS publication #225, available on the website www.IRS.gov.