With the 2015 tax season under way, here are a few tips on how to file your taxes, notes on what is new this year, and some lighter tax tidbits.
E-Filing Is Most Popular Method — And Offers Fewer Errors
Four out of five taxpayers will file electronically, which has been the case over the past three years, according to a Jan. 15 news release by the Internal Revenue Service. The agency is expecting to receive about 150 million individual income tax returns this year.
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As of Jan. 31, the IRS has already received more than 14 million returns so far this season and issued refunds worth $26.8 billion. The average refund is $3,539.
The error rate for a paper return is 21 percent, according to the IRS. Compare that with an e-file return error rate of half a percent.
Those who decide to file paper tax returns could also wait an extra week or possibly longer to see their tax returns than those who file electronically, IRS Commissioner John Koskinen said last month.
Click here for information from the IRS on how to file your taxes for free.
On January 24, 1986, the first electronic transmission of tax return data from a preparer to the IRS was completed, according to the IRS. By 1989, taxpayers in 36 states could file their taxes electronically. By 1990, taxpayers across the United States who expected a refund could file electronically.
IRS Assistance Down After Record-Low Funding
Some not-so-good-news is that the IRS is cutting taxpayer services to historically low levels. If you need to reach the IRS for assistance, only half of the 100 million people expected to call this year will be able to reach someone, the tax agency said.
Koskinen said that the IRS is taking a nearly $600 million dollar cut, resulting in the lowest level of funding they’ve received since 2008, The Associated Press reported.
Health Insurance Information is Required
Taxpayers this year will have to report their health insurance information when filing, choosing from three circumstances, according to HealthCare.gov.
If you were enrolled in a health plan through the Health Insurance Marketplace in 2014, you will receive a new Form 1095-A by mail in early February. Once received, it’s important to check over your information before using it to file your federal income tax return.
If you had health coverage in 2014 from another source, including a job, Medicare, Medicaid or a plan bought outside of the Marketplace, you will report so by checking a specific box on your federal income tax return. You won’t receive a Form 1095-A or have to fill out any additional tax forms.
Those who were not insured during 2014 for three months or more will either qualify for a health coverage exemption or will pay a fee while filing.
Nearly six million households may have to pay a penalty for not having health insurance in 2014, which was required under the Affordable Care Act, U.S. government officials told The Wall Street Journal. The penalty is $95 per adult or 1 percent of family income, whichever is greater.
Income isn't the only thing that's taxed. Some European countries have begun taxing cattle owners on cow flatulence for their role in contributing to climate change. In the U.S., certain states have slapped a tax on candy and playing cards. Check out a round-up here.
Tax Return Fraud Happens
While tax return fraud isn’t a new issue, taxpayers should be aware that when filing online there is the possibility that sensitive information could be compromised.
Turbotax makers Intuit temporarily stopped the transmission of e-filing state income tax returns for less than one day, after the Utah Tax Commission and the Minnesota Department of Revenue found thousands of possibly fraudulent returns, NBC News reported.
A leading cyber security expert told NBC News that most likely the fraudulent work is caused by “a criminal gang, possibly working outside the country.”
Instead of stealing Social Security numbers, thieves buy compromised credentials to gain access to past returns stored on tax preparation software.
Despite the issue, the IRS said that taxpayers should continue to file their tax returns as they normally would. It’s recommended that once users file their taxes on services, they change their login information right away, NBC News reported.