SIKESTON - Whatever the changes in the tax code each year, one things remains the same: when it comes to filing, the earlier the better.
"I always encourage the taxpayers to prepare their returns on the 'sooner' side than the 'later' side," said Jeff Miles, a certified public accountant with the Bucher, Essner and Miles firm.
Those expecting a refund usually beat a path to the door of tax return preparers.
Those who expect to have to pay, however, also benefit by filing early. "It's a little easier to come up with that balance," said Miles. "It's worth it still to not procrastinate."
Miles said it is better to know how much you owe in February than in April so you have more time to come up with the payment. "The money's due April 15," Miles said. "There are extensions for time to file but there's never an extension for time to pay."
As any payments received or postdated after April 15 are subject to penalties and interest, taxpayers who are unable to file on time are advised to try to estimate their tax and send it in with the extension request.
"You're trying to deposit what you think your taxes are going to be by April 15," said Miles. Any extra money sent in is returned by the Internal Revenue Service, but if you send in too little, you will still have to pay a penalty and interest on the shortage.
The penalty is one half of 1 percent of the unpaid tax for each month it remains unpaid up to a maximum 25 percent, according to Miles. "That's the penalty - that doesn't include interest."
Interest may be as low as 7 percent this year, Miles estimated, but typically runs around 8 or 9 percent depending on current interest rates.
H & R Block in Sikeston has an option that may be useful for those "who are unpleasantly surprised," according to Kay Cain, franchise owner.
For a set fee, the bank H & R Block works with will deposit the tax balance due April 15. The loan may then be paid off within the next 90 days without any additional interest or fees.
Filing early also allows taxpayers ample time to make sure all the tax changes from the Economic Growth and Tax Relief Reconciliation Act are taken into account. The 10-year $1.35 trillion tax cut passed by Congress and signed by President Bush in 2001 includes several changes this tax season.
"There's been some confusion on two or three issues," said Cain regarding completed tax returns brought in by clients. "Just when you begin to think you know it, they change it."
Cain said keeping current on tax laws is a year-round, ongoing process. "That's all I did this last year is go to school," she said.
"The biggest change this year is the change in the tax rates and the increase in the child credit," said Miles.
Starting in 2001, a new 10-percent rate bracket has been added. The new rate applies to the first $12,000 of taxable income per married couple filing jointly; $10,000 for head of household; and $6,000 for taxpayers filing as single.
Uncle Sam has also reduced other regular income tax rates effective July 1, 2001, by a half-percent for each bracket for 2001, according to Miles. The rates will gradually drop through 2006.
He explained that because government officials wanted to deliver the benefit of the new lower tax rate in 2001, most taxpayers were sent an early refund check last year. The checks were issued based on the taxpayer's 2000 tax return on file.
Cain said this has confused some clients who completed their tax return forgetting they received a check in advance. "It's not reducing their refund in any way, they are just not going to get it again."
The refunds were calculated as 5 percent of the amount of income that was included in the 15 percent on the taxpayer's 2000 return for a maximum refund at $300 for single filers and $600 per married couple filing jointly.
"If you did not get it all and you have a tax liability greater this year than last year, you may be entitled to it now," said Cain.
Child credits are also not fully understood by many taxpayers. "A lot of people are missing the additional child tax credit," said Cain. "It's increased this year and includes a lot of benefits for the taxpayer. And more people are eligible this year because they've increased the dollar amount and the amount they can get a credit for."
Taxpayers with a child under 17 at the end of 2001, are eligible to claim a $600 credit, up from $500 in the year 2000. The credit will remain at $600 through 2004 then gradually increase until it reaches $1,000 in 2010.
"The additional child tax credit is a refundable credit," Cain said. "The regular child tax credit offsets taxes."
Cain said this means taxpayers can get money back in addition to what was withheld from the additional child tax credit just like the Earned Income Tax Credit.
Other changes to watch out for this year and over the next 10 years:
* The amount that can be deducted on equipment purchased for a business was increased from $20,000 to $24,000 in 2001, subject to certain restrictions.
* There was an increase in the unified exclusion amount for taxable estates to be phased-in over 10 years.
Under the new rules, in 2002 and 2003 estates up to $1 million are exempt from the inheritance tax. This amount gradually increases until 2009.
In 2010 estate tax is repealed completely, Miles said.
Unless new legislation is passed, however, estate tax returns with an unified exclusion of $1 million in 2011.
The unified exclusion amount was $675,000 in 2001.