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Last-Minute Tax Advice Will Cost You

The complex tax code and eleventh-hour changes don’t mean it’s too late to get good advice – but you might have to pay up.

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In some ways, filing taxes has gotten a lot easier in recent years: free electronic filing, Turbo Tax, and now, even an iPhone app from the IRS. But here’s a warning before you start that download: Washington is mucking things up.

The eleventh-hour tax bill negotiated by Congress and President Obama includes some 500 changes—no fewer than 160 pages are now devoted to the estate and gift tax. Those last-minute adjustments mean anyone planning to itemize deductions, be it mortgage interest or charitable donations, must wait until mid- to late February to file this year. And these changes come on the heels of the IRS pushing back companies’ deadline for sending out so-called 1099 forms to Feb. 15 a few years ago. That means taxpayers have already had to wait a full two weeks longer to get the details they need for income like dividends, interest and sales of real estate.

The result is as predictable as, well, death and you know what: Everybody, it seems, is running late this year. Taxpayers and preparers are trying to decide whether to complete a return early and risk having to refile, or wait even longer to make sure they have all they need.“Everything is being shoved closer and closer to April 15,” says John Ams, executive vice president of the National Society of Accountants. (Even the IRS was tripped up—the agency won’t be able to start processing returns until mid-February, delaying refunds for those lucky enough to get them.)

For all but the simplest 1040-filers, the new wrinkles could lead to fee increases, particularly for those with preparers who charge by the hour. Already, the National Society of Accountants says its members spend an average of 30 minutes more per return now than just a few years ago—a 25% increase. And should a new client drop by on, say, April 1—when many preparers are slurping down the coffee and pulling all-nighters—the price of a punctual filing will probably be higher. “It costs more to make something happen that quickly,” says Alan Dlugash, a partner at accounting firm Marks Paneth & Shron in Manhattan.

Of course, charges can vary widely. According to a survey by the accountants’ society, the average cost for an itemized return is $229, but more complicated preparation for, say, estates can easily run $2,000 or more. Fees also vary by region; in Mid-Atlantic states, an average 1040 will cost $252 to prepare, while it would only cost $137 on average in Alabama or Tennessee.

So, what’s the average deductions-taking filer to do? If you’re still missing a 1099, call the company or check your account online. Some mortgage providers, for example, post up-to-date information on interest and taxes that you paid in 2010. Preparers encourage filers to show up with their paperwork as organized as possible and to hand over as many forms as they can early on, even if the last 1099 hasn’t arrived in the mail yet.

Of course, taxpayers can always ask for an extension; but even then, your accountant still has to run the numbers and you still have to pay what you owe—on time, of course. Even so, as today’s Tax Guy column explains, there are still ways to reduce your tax bill from 2010 and you might very well need that time to undo a Roth IRA conversion or make a tax deductible contribution to an IRA.

Readers, what last-minute advice do you have?


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    • good news is, the IRS has extended the dliaedne for the 2011 tax filing season to Monday, April 18, 2011. Filed Under: Tax News, Tax Tips Tagged With: Federal Tax,

    • Our tax code is enormous, thousands of pages most of which are little understood by anyone. It is a costly endeavor in both time and expense to prepare tax returns. Our politicians have talked and talked about the need to change it – make it simple. President W. appointed Snow to look into the problem several years ago, but that is where it ended. I think the job is too big for our leadership. The brain power to do this does not exist, so it appears we must live with. It was interesting to read that the top dog in our Federal Gov’t (Taxation) said he had his taxes down by someone else because it was too difficult for him. When are we going to smarten up ????

About The Tax Blog

  • The Tax Blog brings together a team of award-winning tax journalists from the Dow Jones network and around the web to examine the tax issues, changes and legislation that affect families, investors and small business owners. Our contributors include Tax Report columnist Laura Saunders (WSJ), Tax Guy columnist Bill Bischoff and senior reporter Jilian Mincer (SmartMoney.com), retirement-focused reporter Anne Tergesen (WSJ), wealth management writer Arden Dale (Dow Jones Newswires), TaxWatch columnist Eva Rosenberg and personal finance reporter Andrea Coombes (MarketWatch), and reporter Alyssa Abkowitz (SmartMoney). They’ll provide the latest news and insight, mine the tax code for tips and loopholes, and answer your questions about tricky tax situations. Contact the The Tax Blog with ideas, suggestions or tax questions at thetaxblog@dowjones.com.