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Tax Day in the US


Contributed by Spencer Blohm
April 4, 2014



April 15th - the Ides of April, and the Day of Reckoning for Taxes Submissions, is coming up fast in the US. While tax revenue is essential to government services, repairing and maintaining government-owned infrastructure and national defense, paying taxes is rarely ever popular with those cutting the checks.

The US tax code is getting more complex, in large part due to the Affordable Care Act ("Obamacare"). For many business owners, those changes can mean suddenly having to pay stiff penalties if an employee worked full time and wasn't offered a health care plan.  

Other aspects of the Affordable Care Act are impacting small business owners, freelance contractors and sole proprietorships...not because they're getting new penalties for insurance offerings, but because to pay for the Act, Congress put much stricter (and more expansive) rules in effect when 1099s had to be issued to vendors. While these new regulations are on the books, by and large, the paperwork tsunami they're generating means that the regulation, like many the IRS uses, will be selectively enforced.

The IRS says they are prepared to educate tax filers, but it is a gargantuan task.  

According to social media sentiment tracking tools Viral Heat and Topsy an overwhelming 80 percent of Twitter users mentioning the raised taxes had negative opinions regarding the changes, with Tweeters airing their grievances about everything from the tedium of filing and concerns about the implications of higher taxes for small businesses, to their personal, philosophical issues with taxation in general:


For ordinary wage earners working for a dedicated employer, their taxes remain mostly unchanged. They get a W-2, as well as the standard deductions and the homeowner's mortgage interest deduction, and largely have their taxes withheld by their employer. What's changed is that they can now claim a new tax credit under certain circumstances if they're paying for their own health insurance plan, or they're paying a substantial portion of the cost of an employer-provided health plan.

What's concerning to many Americans, particularly as the 2010 recovery continues to be spread unevenly, is that unemployment compensation, and many other types of pay and compensation, do not have federal withholding taken from them. For someone who's been living check-to-check from unemployment compensation checks, the sudden realization that they should've been setting aside funds for quarterly estimated tax payments is a rude surprise.

Another common misperception about this time of year is the nature of the deadline. April 15th is a hard deadline. If you fail to file your taxes by that deadline (or fail to file for an extension), you'll be eligible for cumulative penalties of 5% per month on the total amount owed to the IRS. Fortunately, this is capped at 25% of the balance, but it can still be substantial. Even if you file an extension, and pay your taxes by the extended deadline, you're still paying a 0.5% (1/10th of the prior penalty) surcharge on your taxes - so if you are filing an extension, even though it says it gives you six months, you're better off paying that bill as quickly as possible.

 

Tags: tax | business | Tax | unemployment | penalties | regulation | insurance | small business | interest | health care | contractors | services | Employment | Other | proprietors

 

 

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