Complexity of tax filings mark differences in season

It’s the end of tax season.

Federal taxes need to be filed by Tuesday, but area tax professionals are reporting a calm, steady season.

“This has been a relatively uneventful, smooth tax season and I say that while knocking on wood,” said Jina Manley, the general manager of all Jackson Hewitt franchises in the state except for the far east.

This marks a stark contrast from last year where glitches, delays and other headaches plagued firms across the country. Of course, weather events elsewhere in the country have delayed filing, leading to procrastination among clients and a swamped workload at the end of the season for professionals.

“Now if you call people on the East Coast they’ll tell you something completely different because the weather has not been good for them,” Manley said of the recent harsh weather events out there compared to North Dakota.

Glitches in filing software as well as continued delays and pushbacks on Internal Revenue Service filing dates contributed to an unhappy season for most taxpayers last year, Manley said.

The IRS had originally announced Jan. 22 as the filing date start last year but then pushed it to Jan. 30. This year the date was the 31st and it wasn’t pushed further. Jackson Hewitt was able to file seven days before that date due to the company’s involvement in what is called “hub testing.” Any returns filed in that seven day window were immediately accepted.

The “smooth sailing” of the season as Manley described it, though, really only applies to the general clientele that franchise firms like Jackson Hewitt, H&R Block and Liberty Tax Service serve. For more complex tax filings, certified public accountant firms say that every year keeps getting more difficult and complex.

“Each tax season is a journey,” said Kevin Sanders of Brady Martz Certified Public Accountants and Consultants, which serves five North Dakota Markets and Thief River Falls, Minn.

Late breaking national legislative changes with each year changes everything for them and often pushes the already short yearly tax season to its further reaches up to the deadline. With each legislative change in filings, tax professionals, tax software developers and the IRS all need to rework the system to meet those new legislative requirements.

“Tax season starts at the beginning of February so we only have a two and a half month season to get things together,” Sanders said. “But the lion’s share of our returns get pushed through in the last three weeks. Basically the last week of March and first two weeks of April.”

“The companies who provide the software and the IRS both need months of lead time and because of that everything gets pushed back,” he added.

This year a particular new tax has made filing more complicated. The “Medicare tax,” which Sanders claims has nothing really to do with Medicare, is found in the Health Care and Reconciliation Act of 2010, according to a congressional information sheet, and taxes a filer an additional 3.8 percent for individual incomes of $200,000 or more or joint incomes of $250,000 for married couples filing jointly. The tax is only on what is termed “unearned net investment income” from investments.

Taxpayers using franchise tax services are probably unaffected by such a new tax, but that’s what sends clientele to the different type of tax services.

“They’ve not made it simpler, they’ve it more complex,” Sanders said of the continually evolving tax code. “We used to do tax planning just manually but you really need a computer to do it now.”

There’s also more money throughout North Dakota to get tied into those complexities. The state is anything but stable and calm when it comes to growth, with all 53 counties in the state experiencing a positive gain of at least 14 percent in per capita personal income change, according to Governing magazine.