- The Washington Times - Monday, March 28, 2005

The approaching deadline to file income-tax returns is forcing most taxpayers to seek help from other people to get the work finished on time.

Only 34 percent of taxpayers are doing their own taxes this year as the complexities of deductions, interest rates and rollovers cause them to seek assistance from professionals or family members, according to a survey by Hudson Global Resources, a New York staffing and financial consulting firm.

A survey by Harris Interactive could explain why taxpayers are reluctant to do the job themselves. It found:

• More than two-thirds of taxpayers answered basic tax questions incorrectly or were uncertain of the right answer.

• Only 19 percent of the 2,200 taxpayers surveyed knew that a dependent who earns up to $700 in a year does not need to file a tax return and still can be claimed as a dependent by a guardian.

• Only 9 percent of taxpayers realized they cannot carry over capital gains from one year to the next to offset losses.

• About 23 percent of taxpayers incorrectly thought 401(k) distributions are tax-free.

• About 16 percent wrongly thought they do not need to pay taxes on distributions from individual retirement accounts.

In response to the confusion, 55 percent of taxpayers hire professionals to help them file returns, the Harris Interactive survey said. Another 10 percent get help from a spouse or other household member.

Some Washington-area residents expressed similar opinions.

“I’m not really a tax person,” said Carla Alston, a property manager from Germantown who said she plans to use a private accounting firm to prepare her tax return. “I’ve looked at the tax forms before, and it’s confusing.”

David Ansell, vice president of a high-technology firm, said he was using a tax-preparation service for “convenience and for me, accuracy, because I’m a little complex.”

He also owns a home business and several properties.

Taxpayers most likely to do their own work are ages 40 to 49. About 37 percent of taxpayers in this age group prepare their own returns, said the Hudson Global Resources survey.

Taxpayers in their 40s “are sufficiently familiar with how to do their own tax returns,” said Brendan Flood, Hudson North America’s chief operating officer.

Familiarity with the process is the top reason taxpayers choose to prepare their own returns, Mr. Flood said.

Among 18- to 29-year-olds, 32 percent do their own taxes. H&R; Block tax service says a desire to maximize refunds is a major reason customers seek assistance.

“Frequent changes in the tax code, along with changes in peoples’ lives, including marital status, new children, a new job or a move, all can create tax savings that the taxpayer may not have been aware of,” said Kathy Burlison, of H&R; Block.

Tax refunds are averaging $2,371 this year, compared with $2,182 last year, the Internal Revenue Service reports.

Missed deductions and foregone credits cost more than 2 million Americans about $945 million in 2002, a government report said.

Commonly overlooked deductions and credits include the Earned Income Tax Credit, job relocation expenses, mortgage interest, child care expenses and charitable contributions.

For the first time this year, taxpayers who paid more in state and local sales tax than they did in state income tax for 2004 can deduct the sales tax instead of the state income tax.

An H&R; Block study showed that 52 percent of Americans were uncertain of tax breaks they could claim.

H&R; Block says it is charging customers an average of $144 per return, which was 6.5 percent higher than last year.

Nevertheless, some taxpayers say they can do as good a job as a professional tax service.

“I think the hard part is gathering up all the numbers,” said John Thomas, a lawyer from Annandale who said he plans to prepare his own taxes. “Putting them onto the forms is the easy part. So you have to do all the work even if you pay someone else to do it.”

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