Whew! This past tax season was a real joy working with Jackson Hewitt. It’s was my pleasure helping the customers of East Point, Ga and surrounding areas with preparing and e-filing both their federal and state income tax returns. I am always a strong advocate for tax clients and I’d help them in any way possible to avoid the devastating news of “Balance Due.”
Yes. I meant “BALANCE DUE”. This past season was the first tax season where I’ve encountered so many people, young and old, that owed federal and state balances after I concluded their estimate’s. I still found it difficult to explain to a customer that he/she has a balance that must be paid, and as a result, all preparation fees must be paid upfront. Their whole mood changes, and for those college kids who have always heard of big tax refund checks, their entire belief in the IRS fades to black. So much so that they don’t want to file anymore until they’re in their career. If only my tax kiosk could talk…
What are the real reasons behind these balances and low refund amounts, you ask? Sheer lack of tax education and understanding. The problem that I saw most, which tops the list, remained taxpayers not knowing how W4 exemptions tie into W2 federal withholding.
Secondly, human resource employees weren’t educating their new hires on the process of claiming exemptions on the W4 form. Another reason I picked up on was parents not educating their children on how to properly fill out the W4 during the hiring process. It could also happen when younger taxpayers don’t know that they won’t qualify for earned income tax credit until the’re 25 years old. Lastly, taxpayers simply weren’t updating their knowledge with new tax laws as well as the do’s and don’t’s.
To break it down, the absence of knowledge on how the W4 directly relates to federal withholding taxes hinders many young taxpayers between the ages of 18 and 24. No one sat them down and explaiend the difference between claiming exempt or claiming ‘0’ or ‘1’ exemption. For tax purposes, one can be exempt from income tax withholding if he or she had no income tax liability last year and expects none this year, income didn’t exceed a certain dollar threshold nor include more than a certain dollar amount of unearned income, and cannot be claimed on another person’s tax return.
Legally, parents can claim their adult child until he or she reaches the age of 24. Because of that reason, young adults between 18yo and 24yo must claim the correct exemption amount, which is ‘0’ or ‘1’. This will allow the IRS to deduct the appropriate amount of federal witholding taxes throughout the year which helps to possibly increase the tax refund the following year.
In addition to claiming correct exemptions, adults also claimed exempt the entire year and wasn’t properly taxed by their employers. Claiming exempt for the entire year created balance due notifications because taxpayers had too much money coming in and no taxes being paid out. All payroll checks should be taxed at least 15% to avoid penalties and balances. If one incorrectly claims exempt for the year, and has more exemptions on their tax form than what’s actual, the taxpayer will owe the IRS. While it’s not good practice to claim exempt, taxpayers do have six months of every year to claim exempt with no deductions on federal withholding. The biggest thing to remember is GOING BACK AT END OF SIX MONTHS AND CHANGING EXEMPTIONS TO MATCH ACTUAL HOUSEHOLD.
Thirdly, today’s human resource offices don’t bother eduating their new hires on the W4 and claiming exemptions process. I’ve asked many taxpayers if anoyone helped them file out their forms and they all said the same thing: someone from human resource gives them a pakcet of forms to fill out alone with no assistance. This, too, goes with parents not educating their children on how to properly fill out the W4 new hire form. The home is where many lessons are start. If parents fail to sit down with their children and walk through the W4 and W2 form, they’re subjecting their children to being taxed incorrectly, thereby procuring the balances that must be paid.
During the new hire process explanation, parents should also inform their children that they won’t be able to qualify for earned income tax credit (or EITC) until they’re 25 years old or become a parent. Young adults automatically assume that they’re earned income eligible because that’s what they’ve been told their whole life. It saddens them when they find out that it’s not appliable until they reach age 25. This is the reason why parents can and should claim their children until they reach age 24 unless than child has made over $4,000 in earned income.
To end, taxpayers simply do not update their knowledge on new tax rules and tax laws. Because of the scam that occured over a period of two years that caused the IRS to lose over a billion dollars from fraudulent returns, and with the ongoing attempt of hackers trying to access the IRS tax refund system, new ruels and laws have been established to prevent that type of loss from occuring again. Having your income taxes prepared by a non-tax professional or someone who isn’t a CPA or accountant can lead to refund amounts being inflated through incorrect means. Whether it’s intetnional or unintentuional, that incorrect inflation could cause longterm problems that result in penalties. taxpayers care the responsibility of updating their tax knowledge every year or having their taxes done by trained professionals who were taught the law and made aware of any significant changes.
Yes, that means taking your business to Jackson Hewitt, or one of our direct competitors, H&R Block or Liberty Taxes, to ensure that your taxes are completed correctly and you receive the maximum amount of whatever refund is owed to you. And one service that all three companies advertiser is reviewing previous submitted returns for mistakes or missed credits to see if it’s possible to obtain more money in the refund check. And who doesn’t want more money? It is better to get a refund rather than to owe money especially if you don’t have access to the funds necessary to pay off any balance. When properly filled out, the W4 withholds the correct tax to alleviate any amounts that may be owed. Be smart… ask a tax pro or human resource expert before you go from refund check to balance due.
Co Kane was born and raised in Miami, FL. She worked as a tax preparer for the last three years and a published author for the last year. She began writing poems and short stories while in middle school and continued writing throughout high school. In 1999, she was accepted to Florida A&M University (FAMU) where she obtained an Associate of Arts degree, a Bachelor of Social Work degree and a Bachelor of Criminal Justice degree. She received her Master of Human Services from Liberty University online in September 2014.
Co Kane was a contributing staff writer for the campus newspaper while in attendance at FAMU. She is an avid spoken word artist, hoping to one day publish her poetry to share with the world. She uses her writing skills in her free time, and while it may take some time for her to create her next story, she uses the downtime to try and update herself with the times that she lives in. In June 2015, she established her own publishing company called Co Kane Publications, and she is currently accepting submissions from new authors.