Hendricks County Flyer, Avon, IN

January 25, 2013

Feeling a bit taxed?

With tax time coming, myths and realities abound

Bart Doan
CNHI

AVON — Between fiscal cliffs, debt ceilings, and the postponement of tax filing deadline, Hoosiers may be feeling a bit taxed when it comes to paying them. But most of Indiana’s residents likely won’t see terribly big changes, at least this year.

The Internal Revenue Service (IRS) has postponed the start of its filing period until Jan. 30. And Vic Ruthig, owner of the Liberty Tax Service branch on Rockville Road, said the late filing deadlines have strapped many Hoosiers.

“Traditionally, it’s always been the second Friday after the new year, so this year around the 11th,” Ruthig said. “The IRS’s position on it is that because of all of the changes in the fiscal cliff legislation, they haven’t had a chance to get all of their systems ready to go.

“It’s been a tough economy since 2008. The government has set an expectation that in January, people can get their money. Now people call up, and they’re crying, they have bills they’ve got to pay, they planned on getting their money in January. If you’re living on a budget and you use that money from your refund to fund certain things in life, it’s a problem.”

Ruthig said he hopes that last year’s events of the IRS crashing isn’t a harbinger of things to come. He said the IRS typically does 15 percent of its total season’s volume in one day. Around 300,000 tax returns were lost last year because so many people filed as soon as they could.

As for the fiscal cliff and the role it will play, he said most of the tangible effects will come in your paychecks.

“The additional 2 percent tax that you can see right now on your paycheck, that affects everybody now,” he said. “The second place where it’s going to effect people is next year, the way dividends are taxed. They’ll be taxed at a higher rate. There will be additional taxes on capital gains where you’ll be taxed higher if you sell a business, stocks, bonds. There are taxes hidden all through the fiscal cliff legislation that effects people in different ways. A lot of the curiosity and anxiety comes from not having the time to look through and figure out how it’s going to effect (people) personally.”

Ruthig advises taxpayers to think again if they believe the rhetoric about only the rich paying higher taxes.

“To me, and this is my opinion, is that the fiscal cliff has created an environment for a much larger conversation,” he said. “There’s basically a producer class, employees, financiers, and then government. Basically what the government did was put most of the new taxes on employees who are very well compensated and the producer class. For instance, Phil Mickelson (a professional golfer who complained about his high taxes forcing him to possibly stop playing) is in the producer class. The people that really didn’t get hit are in the financial world that move money around, typically what is called Wall Street. Their taxes went up very little. So Warren Buffet still pays less in taxes than his secretary.”

Ruthig opined that if raising taxes are going to be inevitable, then it needs to be across the board.

“The producer class is what creates jobs,” he said. “Someone that works as a waiter at Olive Garden or O’Charley’s, the more money the producers make, the more money they’ll make. The producers and employees have gotten hurt in the big scheme of things. People get discouraged.”

One positive that people could see on their returns, he said, is the fact that credits are lower due to the adjusted inflation rate that was not frozen. Something like that won’t have a major impact, he said, but some Hoosiers could see more money in their pockets.

Down the pipe, from a taxation perspective, Ruthig said Hoosiers should be hopeful that the budget recently proposed by Gov. Mike Pence that lowers income taxes by 10 percent passes. That could be a boon for workers.

“It would give people encouragement,” he said. “In Hendricks County, you have a state tax and then a county tax on top of that. If (people) live in Hendricks and work in Marion or Johnson, usually the employer doesn’t take that tax out so they end up owing. There are some states that are talking about eliminating income tax. States like Florida and Texas are booming because it encourages more investment, taking more chances, and people hire faster. I think (the Pence budget proposal) is a good thing.”