Top Questions This Tax Season
The 2015 tax filing season is well underway. And to me it seems like people are a little more anxious to get their returns completed early so they can truly see where they landed last year. Right now I am seeing a lot of new people come through our doors looking for some relief. And these folks have questions…good questions.
I wanted to take a little time to share some of the top questions I am being asked. Maybe you have one of these questions and this post will be helpful to you.
Can I deduct tuition for a private high school?
In particular the question really focuses on college-level credit that some students earn while attending a private high school. That makes sense right? I mean college tuition is deductible so wouldn’t it be deductible even if earned in high school?
The answer is no…sorry. The IRS uses two criteria for education deductions…(1) the money spent must be for a qualified education expense. Well we pass that test. But the second criteria is (2) it must be spent at a qualified, post-secondary institution. That’s where our college credit earned at the high school level falls short. The IRS actually has a list of qualified schools that they update each year. And private high schools are not on the list. Darn it! There are others ways to get tax relief for this kind of educational spend (tease intended).
I got divorced last year. Can I claim (enter the type of expense here)?
This is a pretty loaded question so you’ll have to forgive me when I say, “It depends.” We have to look first at the documents we have to support our deduction because that is our saving grace if we ever get questioned. So that means who does our mortgage interest statement say paid for the mortgage interest? Do we have proof of who paid the property taxes? What does the divorce decree say about ownership of property, who claims the children, etc.?
I hate to be wishy washy, but the honest answer when it comes to divorce situations is, “It depends.” We have to look at the underlying support we have for our deductions.
I owe money this year…what are my options?
The first thing I would say is consider the time value of money. Huh? What I mean is that if you don’t have to pay something right now, don’t. Keep your money as long as you can so you have its power to purchase and grow. Put simply, don’t file early when you owe. File closer to the actual deadline, but don’t necessarily extend…that can waste money. This doesn’t always work as small business owners often need their returns as soon as possible to demonstrate their earning power for leveraging capital. But if you can wait, wait.
Next you may want to look at the IRS Installment Agreement. If your situation lines up, this is a pretty basic election that can be taken when we file the return. The agreement can set up monthly payments on the tax bill for as long as 6 years at a pretty reasonable interest rate and you can actually request which day each month you want the payment to be due. That can really make life a bit easier for budgeting purposes. I am not an advocate of being in debt to anyone, but sometimes life throws you curve balls and having options can help.
How long is it taking to get refunds?
I must say it seems to be taking a bit longer than it did last year. For whatever reason, the refunds early in tax season last year were quite fast. I saw clients getting them in 7-8 calendar days. The IRS typically says it takes 2-3 weeks to get them and in the past they seemed to only pay them on Fridays. But last year they were quick.
This year seems to be a bit slower (maybe someone at the US Treasury got my memo on the time value of money)! I’ve noticed returns seems to be stuck in the “Were processing your return” stage a little longer than before. So I would suggest being a bit more patient this year. Don’t go jumping to a refund anticipation loan place (yes…I’m calling you out big box tax preparers that are preying on people’s refunds) and paying the ridiculous interest rates to get cash in hand. Be patient and get your refund at no additional cost.
Maybe I answered a burning question you have. If not, feel free to ask it below or reach us through our Contact Us page.