- The Washington Times - Thursday, April 12, 2001

In tax season, bad things are usually coming to those who wait.

"In January, you have people with earned-income credits and large refunds," says Susan Miniter, an accountant who has run her own business, SCM Tax Prep of Clintondale, N.Y., for 23 years.

"But March and April is when you have the self-employed people and the technology professionals, who have high incomes and know they'll owe," she says.

Rudy, a software developer at a local high-tech firm who asked not to be further identified, is a typical last-minute filer. He plans to wait until the end of this week.

"I'm certain I'll end up paying them several thousand dollars," he says. "I know I'm cutting it close, but I have been putting off that stress."

Accountants are used to seeing taxpayers who owe file at the last moment, but they say this year more people are also hurt by the depression in the stock markets.

Some of the people with investments "were smart enough to take losses by selling" after the market went sour in late 2000, but others did not, so they are now "out of pocket and are finding themselves poorer," said Edward Snyder, managing partner at Bethesda, Md., accounting firm Snyder, Cohn, Collyer, Hamilton.

In Rudy's case, the hesitation to file was not caused by the drop in the market, but because he invested last year. In November, he was able to buy shares of his company at a high discount, and although Rudy has not cashed in his investment, he now has to pay taxes on the amount he saved by buying the stock at the lower rate. The stock was $22 a share and he bought it at $1.80 a share, so he has to count the $20.20-per-share difference as income.

"Because it's a large number of shares, it puts me in a different tax bracket, and I could end up owing the government a potential $10,000," Rudy says.

To compound his problem, Rudy is single, a renter and he has no children. People in this situation "pay more in taxes than someone who's married and has a couple of children," says Mrs. Miniter.

"I really feel bad for them," she says. "But married people are also taking a good chunk. Though the person who pays the most for taxes are self-employed people, who pay 15 percent [Social Security tax] on top of the 15 percent [that on average] everyone owes. So if they are making $20,000, they are paying $6,000. Now where are you going to find $6,000 to pay that tax?"

That's a question that every American who has some sort of income faces at this time of year. Whether the money comes from wages, investments or retirees' pensions, on average 15 percent of people's yearly income goes to the Internal Revenue Service every year.

Because that money comes out of people's total taxable income, the way to lower the amount owed is by claiming deductions, which are available to students, single parents, homeowners, and for other specific circumstances, such as high medical bills.

Deductions make a tremendous difference. Mrs. Miniter says that she had two couple clients with the same income this year, yet one had to pay $7,000 and the other less than $1,000.

The first couple had no deductions to claim and were renting housing. But the other couple benefited from having three children, each of which is an automatic $500 credit. They also paid a baby sitter to take care of the children and both went to college, so they qualified for two more deductions.

"They didn't even realize it, but they fit into almost every credit imaginable," says Mrs. Miniter.

As lawmakers seek to develop more tax cuts for their constituents, the tax code becomes more and more complicated with each passing year, and accountants say it is cumbersome and ugly.

"Nobody ever steps back and says: 'How can we have these incentives and disincentives in the economy in a way that doesn't come out so complicated?' " says Mr. Snyder.

This year, the IRS is having some additional problems. A recent Treasury Department investigation discovered that IRS workers give customers incorrect information almost half of the time. Investigators also found that more than one of three calls to the agency do not go through.

This has driven many taxpayers to seek ways of filing that involve as little contact with the IRS as possible. This year, 27 percent more people or 16.41 million Americans filed their taxes on line compared to a year ago.

One D.C. resident, Jennifer Gauck, a research assistant for the Bureau of Transportation Statistics, filed her taxes over the phone an increasingly popular service offered by the city government.

"D.C. sends around a booklet, specifically addressed to you, and if the information in it is all correct, you can confirm it and file over the phone," she says. "You can't have anything complicated, but basically if you're single, or make less than x amount of money, and don't have any deductions, it works."

She adds: "Last year I did an easy form, but this was a lot faster, and it was nice to know immediately. 'Oh, boom. I'm getting $25 back.' And I had the check in the mail like a week and a half later."


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