The 2002 tax season heads into its final weeks with interim numbers up in every category except TeleFile returns, according to the latest Internal Revenue Service filing statistics. Total individual returns received so far are 3.6 percent ahead of last year at the same point in the season, and total returns processed so far are up 5 percent over last year.
More dramatically, the volume of e-filed returns is up a whopping 13 percent over last year. As of mid-March, e-filed returns prepared by tax professionals exceeded 24 million, an 11-percent increase over last year. Refunds certified by the Martinsburg, W. Va., Computing Center averaged $2,004, up 11.9 percent from last year.
"We’ve seen a big increase in e-filing," said Claudette Huggins, owner of Gallipolis, Ohio-based Dantax. "It’s not confined to RALs, it’s across the boards," she said. "There has been a big increase in our loan product - Loans Now - but we’ve seen an increase in the balance-due returns as well. We push e-filing, but we haven’t had to push too hard because a lot of people are worried their returns will be held up if there’s more anthrax contamination."
In one controversy which has emerged with regard to e-filing, the National Society of Accountants has accused the IRS of delaying refunds on e-filed returns. John G. Ams, NSA’s executive vice president, wrote IRS Commissioner Charles Rossotti that some delays "stretch far beyond the projected dates listed in the IRS e-file 2002 Refund Cycle Chart. Also, it seems that refunds over $10,000 are in some instances being forwarded to Criminal Investigation for review."
An IRS spokesman said that, in general, e-filed returns with direct deposit will receive the refund in as few as 10 to 14 days, but there is no guarantee as to a specific date. The IRS spokesman also affirmed that e-filed returns are treated the same as paper returns with respect to review.
John Hewitt, president of Virginia Beach, Va.-based Liberty Tax Service, said that refunds in Liberty offices are up 17 percent over last year. "More people are getting refund anticipation loans, because the refunds are higher this year," he said. "It’s also a sign of layoffs in the economy - a lot more people wanted their refunds early, in January and February. This is typical of recessionary times over the last 15 years."
Dantax’s Huggins, who inherited the business - and a love of tax preparation - from her father, said there’s a slight lull right now. "Most of our larger returns are people with businesses and farms, and the ones with a lot of stocks and bonds."
"The rate reduction credit has been a nightmare," said Huggins, "because so many people didn’t keep Form 1275 telling them how much they received last year. If we have access to last year’s return we can get a pretty good idea of what they received, otherwise we have to go through the Teletax system to get the data."
Some of her competitors, she said, were including the rate reduction as income and having the taxpayer pay tax on it. Dantax has 24 locations in Ohio, Kentucky, West Virginia and Virginia.
Mike Lister, president of Parsipanny, N.J.-based Jackson Hewitt, has found the same trend nationwide. "What started out as a great benefit for taxpayers has created some challenges this year," he said. "A lot of taxpayers are struggling with how much to put on the return."
This year’s filing season got off to a slow start, according to Lister, with W-2s slow in coming out for many taxpayers. "The early filing season was spread out a little longer, but there’s been a continual growth building the entire season," he said. Jackson Hewitt expects that about 95 percent of its returns will be e-filed this year.
Lister said that the effect of recent tax law changes taking place over a number of years gives preparers the opportunity to explain the changes affecting more than the present year. "Our preparers give the taxpayer an overview of the changes affecting next year’s returns, as well as this year’s. The customers are aware of the changes and we make sure we foster their knowledge by bringing it up," Lister said.
Long Island, N.Y.-based sole practitioner Steve Valenti, CPA, noted that revisions to the forms in midseason has caused some problems. "It’s raised havoc for some preparers, since they have to be conscious and make sure the changes are taken into account for any affected taxpayers," said Valenti. "Fortunately, Internet access has made it possible for most practitioners to get updates to their software as events happen."
Valenti, a member of the Tax Division executive committee of the New York State Society of CPAs, observes that changes in the law over the last 10 years impact a growing pool of low and middle income taxpayers. "More people need to use professional preparers now than ever before," he said. "The pool of potential clients has increased as a result of the nature of the changes."
Dennis Stuver, a Virginia Beach, Va.-based preparer, agrees. "We’ve done a significant number of returns for people who started out doing it themselves, but were not comfortable - they want someone else to look it over. Some of them have bought the consumer software and spent hours going through it, but were afraid to hit the last button."
Stuver, who owns three Liberty Tax Service locations in the Hampton Roads area, said he has a special discount for taxpayers who have started out on their own but decide they need help. "If we find a mistake, we give the taxpayer the option of filing the return his own way or having us prepare the whole return."
Lisa Baker recognized the same trend. "More and more people are reliant on paid professionals, especially with the changes that came about this last year," she said. Baker, who expects her two offices in Tennessee and Virginia to complete over 700 more returns this year than last, said, "It just keeps on growing - the average taxpayer is becoming more dependent on someone who can help them file a return."
Tony Batman, chief executive of Dallas-based 1st Global, has noticed less stress among preparers this season than in past years. "Accounting firms are better prepared than in the past. Their people are better trained, and they’ve been able to retain more talent in a soft labor market."
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