The 2012 tax season has begun and the South Carolina Department of Revenue (SCDOR) is urging taxpayers to file their income tax returns electronically.

South Carolina is a national leader in the percentage of its taxpayers that file electronically. Of the 2.1 million returns processed in 2011, 1,692,965 were filed electronically with taxpayers receiving an average refund of $837.

Electronic filers may receive a refund in as little as 10 days, as compared to those who file a paper return, which could take an average of three weeks to receive a refund.

In South Carolina, taxpayers can file their state income tax return electronically by purchasing and using commercial tax preparation software, having a professional tax preparer file for them, or using Free File through SCDOR’s website.

Qualified SC taxpayers can take advantage of free tax preparation services available through Free File in order to electronically prepare and file their state and federal income tax returns simultaneously for free. Since its inception in 2003, the Free File Alliance has offered 70 percent of taxpayers free access to leading commercial tax preparation software. While users benefit from Free File’s automatic check for accuracy, the program is also user-friendly, completely paperless, safe and secure. Taxpayers with an income of $57,000 or less can visit www.sctax.org and click on the Free File icon to e-file their return with one of the six vendors offered.

New in 2012, taxpayers receiving a state income tax refund will be mailed a prepaid debit card containing the amount of their refund, in place of a paper check. In addition, taxpayers have the option to choose direct deposit or to receive a paper check if they do not wish to receive a debit card. Direct deposit is the refund method preferred by SCDOR.

To learn more about filing your taxes electronically, or to check on the status of your refund, visit www.sctax.org or call the individual income tax section of SCDOR at (803) 898-5709.

You may call Tax On Wheels, LLC at 803 732-4288 if you need assistance with state or federal income tax issues.

The refunds from the first batch of returns electronically filed this year were due to be direct deposited by this weekend.  Many of these refunds will be deposited as scheduled but the IRS has advised that there may be technical issues which may delay some portion of the refunds currently due to be released.

The issues are being worked on and resolution is anticipated soon.  Apparently the IRS is using the new CADE system to process some refunds but they are still using older legacy systems to process other refunds.  It seems that the delays are coming from the refunds processed through the older systems.

Again, it is anticipated that the delays will be resolved soon and the IRS recommends that taxpayers use the Where’s my refund tool to check the status of expected refunds.

Please call us as 803 732-4288 if you need assistance with this or any other tax  related issues.

The South Carolina Department of Revenue (SCDOR) will honor the April 17^th individual income tax filing deadline set by the Internal Revenue Service.

Since April 15, 2012 falls on a Sunday, and Emancipation Day in Washington, DC (a DC-only holiday) is observed on Monday, April 16^th, the official filing deadline will move to the following business day which is Tuesday, April 17^th.

SCDOR will honor the federal due date but will not change forms to reflect the April 17^th deadline. This deadline applies to any income tax return or payment normally due on April 15^th; it also applies to the deadline for requesting a tax-filing extension.

South Carolina taxpayers who file and pay electronically have until May 1, 2012 to do so without penalty or interest being assessed. The May 1^st deadline does not apply to federal returns or to SC taxpayers who file paper returns.

Refund Anticipation Loans have followed the floppy disk and the buggy whip into a state of obsolescence.

Refund Anticipation Loans or RALs, as they are called, are very short term loans based on the anticipated receipt of your tax refund.  These loans allow you to get your tax refund in a matter of a couple days instead of the weeks or months it can take to receive the actual refund from the government.  You get your money now, and the loan gets repaid when the government releases your refund some time later.

Of course there is a cost for this service, and the cost was relatively expensive.  But if you don’t really have any other options for obtaining a few thousand dollars quick, fast and in a hurry the cost of the loan really didn’t matter.  If grandmaw is locked up in the jailhouse waiting for bail money, a couple hundred dollars in loan costs can seem pretty inconsequential.

Back in the eighties when electronic filing was in its infancy, and it literally took anywhere from 4 to 12 weeks (or more) to receive your tax refund from the government, a couple hundred dollars might not have been such a bad deal in order to speed up  the receipt of a couple thousand dollars.  But as electronic filing matured, the amount of time it took to receive the actual refund from the government got much shorter.  Now it takes about 10 days to receive direct deposit of your actual refund.  It is hard to justify paying that much to shave a few days off of the time it takes to receive your refund.

Additionally, the RALs attracted and encouraged fraudulent tax returns due to its popularity with recipients of the Earned Income Tax Credit (EITC or EIC).  You could get the money now and be long gone by the time the IRS figured out you were not entitled to the money.

For the past few years the IRS has actively discouraged the use of RALs by limiting the release of the debt indicator, a key piece of information used by the banks to approve or disapprove the loans.  But the banks found innovative ways around the missing information.  Then the FDIC and the Federal Trade Commission (FTC) entered the fray to try to limit these loans.

So now we find out that the last bank still swimming against the tide of disapproval against RALs has entered into a settlement agreement with the FDIC to end the program at the end of this tax season.  The FDIC entered the discussion because of their regulatory responsibilities over the banking system.  So now it appears we have reached the end of an era.

Tax On Wheels, LLC hasn’t offered a RAL program the past few years because we saw the handwriting on the wall.  From the very beginning of the electronic filing era we have always encouraged our clients to file electronically and to use direct deposit in order to get their refunds as quickly and inexpensively as possible.  Most clients took that advice.  However, there were always a few clients that, for whatever reason, couldn’t wait for their refunds, or didn’t want to.  Now they will no longer have a choice.

IRS e-file: It’s safe. It’s easy. It’s time. Most taxpayers—nearly 80 percent– file electronically. If you haven’t tried it, now is the time! The IRS has processed more than 1 billion individual tax returns safely and securely since the nationwide debut of electronic filing in 1990. In fact, last year, 112 million people – 78 percent of all individual taxpayers – used IRS e-file to electronically transmit their tax returns to the IRS. The number of people who use a paper tax return or who mail a tax return dwindles each year – and for good reason .

1. Safety and security.  E-file providers must meet strict guidelines and provide the best in encryption technology. You receive an acknowledgement within 48 hours that the IRS received your return. If the IRS rejects the return, the receipt will explain why so you can quickly correct and resubmit.

2. Faster refunds. An e-filed tax return normally means a fast refund. If you combine e-file and direct deposit the IRS can typically issue your refund in as few as 10 days. About three of four taxpayers receive a refund and last year the average refund was approximately $2,900.

3. More payment options. If you e-file you can file early and set an automatic payment withdrawal date for any date on or before the April due date. You may also pay by paper check or even by credit card.

4. It’s easy. You can e-file through your tax preparer, use commercial tax preparation software or through Free File, the free tax preparation and e-filing service available exclusively at www.irs.gov.

Starting in January 2012, any paid preparer or firm that reasonably anticipates preparing and filing 11 or more Form 1040 series returns, Form 1041 returns or a combination of both generally must use IRS e-file.  These tax return preparers must be authorized IRS e-file providers so they can transmit tax returns electronically.