With W-2 forms hitting taxpayer’s mailboxes, it’s a reminder that tax season is here. The Internal Revenue System’s (IRS) electronic tax e-file service has been open for business since Jan. 15. And while many consumers fear doing taxes or procrastinate doing them, for tax preparer Naga Donti of Jackson Hewitt Tax Service in Lowell, there’s no time for delay – busy season is here.
The majority of his business takes place in the four weeks before mid-February, and this year, he anticipates his office will complete just under 2,000 tax returns by April 18, the due date this year for 2010 individual federal income tax returns.
“The bottom line is try to reduce taxes and increase refund,” said Donti. “I try to help everyone get the maximum refund that they are allowed. The IRS and the state keeps adding deductions and credits but often customers don’t know how to take advantage of these.”
In a complex age when even the head IRS tax commissioner himself reportedly doesn’t file his own taxes but uses a tax preparer because of the labyrinthine tax code, about 60 percent of Americans use tax preparers and another 20 percent use software to file their returns.
“Off-the-shelf packages can be powerful tools, but if you’re not trained to use them, they can become a liability,” said Donti, a former engineer and chief information officer for small manufacturing companies who used to informally help friends and relatives with their taxes. “It would take them 20 hours to file a return, but took me only a half-hour.”
Nine years ago, he left the technology industry when, tired of constant corporate requests to relocate, he sought a more stable franchise opportunity. “I evaluated everything from sandwich to muffler shops, and decided on income taxes, because I’m comfortable with rule-based businesses and good with money and numbers.”
Q: Any tips for filing 2010 taxes?
A: Lapsed tax laws are kicking back in for higher income individuals, and there are tax credits for energy-saving home improvements, and higher education tuition. I could go on and on.
Q: What are some unexpected tax scenarios that you never expected to face?
A: Families with three or more children earning less than $48,362 can get an Earned Income Tax Credit, and I never expected the amount of fraud I see, with people trying to claim other people’s children – nieces, nephews, or whoever – in order to break rule and get the extra income back. Some people have a legitimate relationship, but others, when questioned, will walk out. Thankfully, now with filters and a field audit force, fraud is happening less and less.
Q: How do you keep up with all the tax law changes?
A: I participate in online seminars, read publications and case scenarios, and do practice tax returns. And I stay in touch with other tax law business owners. Whenever anything stumps us and we feel that something isn’t right, we consult among ourselves.
Q: Is there a lot of ignorance about taxes out there?
A: Yes, definitely. Last year, a new customer had an appointment in late winter, and then postponed it until March. When she called to reschedule, she said, “I just had a baby and now I can come in, since my child is born and I can claim him on my tax return.” I reminded her of one small detail: the baby would go on next year’s taxes, not the previous year.