Tax Prep Advice for Feds

By on February 18, 2013 in Current Events, Retirement with 24 Comments

As the tax season looms, taxpayers need to prepare carefully in the wake of new tax laws. Although many mistakes are simple enough and fairly easy to avoid, there are some changes that make 2013 quite different than many taxpayers expected. Here are some tips on what federal employee taxpayers can expect as they file taxes for the past 2012 tax year.

Be careful with the math

As simple and obvious as this advice may seem, mathematical errors are still the most common problem with tax returns. Pay close attention and double-check every figure, as the tiniest slip could create a huge issue. Using a tax software program is advisable, as it can easily perform calculations and help you avoid simple mistakes.

Include an identification number

Social Security numbers are no longer automatically included on taxpayer forms, so remembering to write an identification number on the tax form is crucial. The identification number is necessary in order for the tax return to be linked to income statements. In addition, the identification number is needed if the taxpayer wishes to obtain certain credits, such as the child tax and dependent care costs.

Medical expenses

Not all medical expenses can be counted towards a deduction for the 2012 tax year. Deductions based on medical expenses can only be the amount of medical and dental expenses that exceed 7.5% of one’s adjusted gross income (AGI). Watch out for next year, when that number rises to 10%. Taxpayers over the age of 65 will be able to continue to claim deductions at the former rate until 2016.

The cost of health coverage

In box 12 of the W-2 form, taxpayers will find the amount that their employers spend on their healthcare. Don’t worry about this number, however, because it does not need to be included on the tax return. It is there simply for informational purposes.

Retirement savings

One easy step that can reduce your tax bill is placing money in your TSP plan. Contributing to the TSP means that the money is set aside before withheld taxes are calculated, so the figures going on to a tax return are reduced. For next year, remember that FERS employees are allowed to place $17,500 in their TSP in 2013, and that number is increased to $23,000 if a taxpayer is over 50 years of age.

Roth TSP

A regular TSP account can now be rolled over into a Roth TSP at any time, as long as the option is available to you. A Roth TSP option offers a flexible tax plan that can make it preferable to the regular TSP. You must be aware of Roth conversion taxes, however. Taxpayers who converted to a Roth IRA in 2010 must still pay extra taxes with their 2012 tax year return.

Charitable Donations

Taxpayers should be sure to include all of their charitable donations on their tax return, whether it was cash or a physical gift, such as clothes or a car. If a taxpayer donated to a qualified organization, there is an even better chance that he or she will receive a good deduction. Another issue to consider is qualified charitable distribution provision (QCD). Taxpayers who are over 70 ½ may own a distribution from the IRA that can be paid directly to a qualified charitable organization.

Don’t be too hasty

Taxpayers should not be in too great a rush to get their taxes filed. Yes, they must be timely, but spending time to make sure that every aspect of your tax return is recorded correctly could save you lots of money long-term. You must be sure to check all of the changes in the law. There might be new deductions which you could qualify for. Simply taking time to read back over your  work on a tax form, even just once, is a wise idea. Double-check every entry, every calculation. Have someone check your work.

Tax professionals

Perhaps one of the most important pieces of advice for taxpayers is to seek professional assistance. Tax advisors will be completely knowledgeable of the new laws for 2013, and able to assist you with the tricky issues of tax returns. Even if you are reasonably confident in your ability to file your taxes on your own, a tax advisor can help you to have peace of mind that you aren’t missing something important, and haven’t made any errors in calculation. Even tax software programs cannot quite match the ability of a tax advisor to catch little mistakes.

Changes in 2013

With the passage of the “American Taxpayer Relief Act of 2012” through Congress, a whole new set of tax laws came to be. Here is a quick rundown of the most important changes to be aware of in the midst of filing tax returns for the 2012 tax year.

  • Income Tax Rates
    Income taxes are largely staying the same in 2013 except for taxpayers in the highest bracket. Taxpayers with incomes above $400,000 per year will face a tax rate of 39.6%.
  • Medicare Surtax
    A part of Obama’s health care laws, the Medicare surtax is a 3.8% tax on net investment income, which includes unearned income such as interest and dividends.
  • Exemptions
    Deductions based on personal and dependent exemptions will be phased out for taxpayers with a certain level of income.
  • Earned Income Tax Credit
    Low and middle-class spouses filing jointly with 3 or more dependents will benefit from the increase of the earned income tax credit in 2013. They will now be eligible to receive $6,044 in an attempt to help them stay on top of their finances.

As taxpayers finish up their tax returns, the most important things to remember are to take great care in entering your information and to thoroughly check all of the tax laws, both old and new. Small mistakes can have great consequences, and no one wants to face penalties and fines due to an honest mistake. Most importantly of all, taxpayers should obtain the assistance of tax software programs or tax advisors.

© 2016 Jason Kay. All rights reserved. This article may not be reproduced without express written consent from Jason Kay.

About the Author

Jason Kay is a professional resume writer and regular contributor to KSADoctor.com, a professional federal resume service and repository of sample KSA statements.

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  1. Burgerwars says:

    I just use a tax preparation software package (HR Block tax cut).  It’s not rocket science.  Who does their return by paper and calculator these days?  After I’m done, I browse over things.  It does its own checker and I browse over what I did.  If it looks OK, I just transmit the return and get it over with.  In fact, I did my returns a week and half ago and already got my refunds.

  2. Roy says:

    Please see http://www.irs.gov/pub/irs-pdf…,
    page 9/35, Employer-Sponsored Health Insurance Plan:

    Example. You are a federal employee participating in the premium conversion
    plan of the Federal Employee Health Benefits (FEHB) program. Your share of the
    FEHB premium is paid by making a pre-tax reduction in your salary. Because you
    are an employee whose insurance premiums are paid with money that is never
    included in your gross income, you cannot deduct the premiums paid with that
    money.

    This information absolutely needs to be shared with your reading audience so
    that they will be aware of this invaluable benefit that they are receiving, and
    just as importantly so that they won’t claim a deduction to which they aren’t
    entitled.

     

  3. Cindyl541 says:

    So now I need 3 babies to get the EIC? I gotta find more babydaddies! Glad Obama got my back. I can’t live without a phone either!

  4. Cindyl541 says:

    So now we need 3 kids to get the EIC? I need some more babydaddies! Good thing Obama’s got my back. I can’t live without a phone either!

  5. USPS Letter Carrier says:

    “A regular TSP account can now be rolled over into a Roth TSP at any time, as long as the option is available to you.” – author J.K.

    TSP site > What’s New:  “ TSP examines in-plan conversion option — The President approved the American Taxpayer Relief Act of 2012, on January 2, 2013. This law allows the TSP and other qualified plans to give participants the option to convert their traditional account balances to a Roth balance… We are currently waiting for tax reporting guidance from the IRS and will be studying the actions required to offer a conversion option.  After that review, we will make decisions on whether to proceed.”

    The option to roll over one’s regular TSP account to a Roth TSP is not available to anyone yet.

  6. $15300432 says:

    The Dem’s in the Senate as part of their attempt to undo the sequestration problems have added HC paid by the employer as income for 2013. There also a move under foot to tax the employer’s contribution to a defined benefit retirement fund

  7. Comrade1917 says:

    Support your comrades.

    Federal employees should make extra tax payments.

    Forward, federal comrades!

  8. Dave_isle says:

    I’m wondering about how FSA really works.  I withheld $5000 for dependent care, which saved taxes on that amount. However, when I filed taxes, it penalized me for having those deductions.  Where I would have had a $2000 child tax credit, I only recieved $250 after accounting for the withholdings.  Why would anyone want to use FSA?  I wouldn’t have paid that much in taxes. 

  9. Sincerely_09 says:

    Several years ago I used HR Block – never again! For 3 yrs I traveled extensively for work during Feb-Apr so I didn’t file. I decided to use HRB since I was afraid I would make mistakes even though my paperwork was extremely well organized. Their fees keep 2/3 of my returns. Quite a while later I entered those years into TurboTax just to learn from it… they missed $1000’s of deductions, etc.  They did the bare minimum in about 90 minutes.  TurboTax people… do just a little homework & they make it fairly simple.  Way better than those HRB clowns.

    • Watcher_In_the_Rye says:

      I actually know several people who work seasonally for HR Block.  They are not someone I’d want to do my taxes even through they are just filling out the HRB software.  I use TurboTax too.

  10. Jhenjoh says:

    I’ve had my taxes done “professionally” three times. Not once were they done correctly, including the return done by a tax lawyer. Twice I caught the mistake and had them fix it before I filed. The third time I was overseas and my wife had them done. It was two years before I found out the mistake. The following year I paid penalties and interest on the underpayment generated by the error. Then I discovered the mistake while doing the next return. I had to file two years of amended returns to recover my overpayment of taxes and to recoup the penalties. Thanks professionals.

    • little taxpayer says:

      All the more reason for a flat tax that everyone can understand.

      • grannybunny says:

        The disadvantage of a system of so-called “flat taxation” — that is, that it is regressive and more burdensome on lower income taxpayers — is not overcome by its simplicity.

        • Me says:

          Assuming there is no minimum income requirement.  Paul Ryan suggested a two tier system as well.  He was an extremist, as we all know.

        • little taxpayer says:

          All the more reason for a flat tax that everyone can understand.

          The flat tax isn’t so much regressive as it is fair – it hits everyone equally.  There doesn’t seem to be any desire to curb so-called entitlement programs, so even though low income households would pay a tax, it would be more than offset by federal benefits.   The current system penalizes success, penalizes hard work, penalizes the producers of society.  It’s a punative system designed to  make the 51% pay for the 49%.  Actually I’m wrong about that.  It’s a punative system designed to make the 5% pay for the 49% while the rest of us are pulling our own weight.

        • Rambo1957 says:

          Burdensome as they have to pay something? What’s wrong with being fair as in the same for all? 10% on 25,000 is 2,500. 10% on 1,000,000 is 100,000. I think that is fair.

          • grannybunny says:

            You are certainly entitled to your opinion, but 10% for someone living paycheck-to-paycheck — the payment of which would create a hardship depriving that person of the necessities of life — is not “the same” as 10% being assessed against a billionaire.

          • Rambo1957 says:

            So you are not truly looking for fairness. Fair would be “the same” for all. That billionaire would chip in one hundred million dollars! That’s not enough? We must all do our part I agree. Many people, through no fault of their own, have fallen on hard times. Much, if not most of the time, those living paycheck to paycheck have made
            poor financial decisions and should not be rewarded and those who work hard, invest and live within their means should not be punished nor ridiculed for not doing enough.

        • $15300432 says:

          True there is no way we can ask the 47%, the dem base, to ever pay federal taxes

          • grannybunny says:

            To the contrary, the Working and Middle Classes are the only ones paying their fair shares.  Tax loopholes overwhelmingly favor the wealthy, which is why Warren Buffett pays a lower effective tax rate than his secretary.

          • Sincerely_09 says:

            Rambo you are just mean.  I’ve found that grannybunny likes to support herself with general talking points & liberal headlines rather than applying logic & verified facts.

          • D Byte says:

            There is a natural bias to consider income disparity to be somewhat uniform, but the reality is the richest have obscene amounts.

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