Tax Season Nears End: How Was It For You?
It may have been one of the smoothest in memory, but what will it mean at the voting polls in November?

by Rick Telberg
At Large for the AICPA

The countdown to April 15 enters its final hours this week.

From all indications, it may turnout to be one of the smoothest seasons in memory.

At last glance, electronic filing remained at record levels. The IRS reported more than 45.8 million tax returns were submitted through e-file through March 26, a 12 percent increase from last year.

"To avoid last-minute tax headaches, we urge people to use e-file," said IRS Commissioner Mark W. Everson. "E-filing is the fastest, easiest way to do taxes. There are fewer errors, and taxpayers get their refunds in less than half the time of paper returns."

Through March 26, e-filing continued to show strong growth in several areas:
-- e computer filers submitted nearly 10.5 million returns, an increase of 22.9 percent from last year.
-- professionals filed more than 32.2 million returns electronically, a 10.9 percent increase from last year.
-- Free File program topped 2.6 million returns, a 24 percent increase from last year.

The growth in e-filing continued as the IRS entered the busiest part of the filing season. Nearly one-third of all taxpayers file returns in the final weeks before the April 15 tax deadline.

The major controversies of the season centered around (1) questionable, possible even criminal, tax-shelter scams, and (2) offshoring, which became an election-year issue. Both, in the final analysis, will turn out to be non-issues. Tax scams come and go and offshoring is hardly different than the old days of working with outside service bureaus, but on a global scale.

The biggest headache for tax professionals may have been the dividend tax cut. CPA Bill Lazor in Kingston, Pa., reportedly went through three 1099's before giving up and putting his client on extension. The problem stems from brokerages which fell behind in reprogramming their computers. It was taking them three to five tries to get it right.

"There's a lot of people tearing their hair out," said Tom Ochsenschlager, the AICPA's new vice president in charge of tax issues told a reporter.
The top questions from taxpayers for the season come from Fiducial, one of the top ten largest accounting chains in the nation.

How many of these did you get...?
1. Whether to opt out of bonus depreciation for new property purchases;
2. Who must file amended returns for reporting dividend income;
3. Who should claim education tax credits - the parent or child;
4. Who must pay the Alternative Minimum Tax; and
5. How to maximize losses on the sale of securities.

But the lasting result of this tax season may be its effect on the presidential race. The Washington Post reports refunds "are turning out to be substantially below lofty predictions."

Through March 26, the average refund sent to nearly 63 million taxpayers was up just 7.1 percent over the same time a year ago. Although the Treasury Department says the final number may be higher, it still is a long way from the 20 percent to 25 percent increase some private forecasters had expected.

It's also lower than the average 8 percent annual gains of the last five years. This year's average refund, $2,113, is up just $140 from last year's comparable figure.

"The unexpectedly small refunds could have widespread ramifications -- not only for family budgets but for the 2004 presidential campaign," said the Post.

This season's federal tax refunds had been expected to give President Bush one last economic push from his three consecutive tax cuts; but, the Post said, last year's predictions of a $30 billion-plus refund stimulus appear to have been too bullish.

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