The trickle-down theory lives, if taxes are any indication. Confusion and frustration over the federal tax law have spread to the state level as people start to work on their Illinois tax returns.
At first, changes in federal tax law were viewed strictly in light of the cash bonanza they would bring to Illinois. But now state revenue officials are hearing from residents who see the changes as unfair or burdensome.
Without any tax rate increase, Illinois expects to be about $100 million richer at the end of the tax season, said Helen Adorjan, spokeswoman for the state Department of Revenue.
That`s because the starting point for computing the Illinois income tax is the adjusted gross income computed for the federal 1040 tax form.
The new federal tax law eliminated many deductions that lowered adjusted gross income. The eliminated tax breaks include deductions for some business expenses; the two-wage-earner benefit; many deductions for individual retirement accounts and company-sponsored 401(k) savings plans; and deductions for moving expenses.
With a larger adjusted gross income, Illinois will apply its flat 2.5-percent income tax to a greater base. Adorjan said the state expects to collect about $21 for each of the more than 4.7 million returns filed in this state.
The reality of that $21 has only recently hit home for Illinoisans, who are finding unpleasant surprises as they work through their state tax return. Those surprises may be the reason the number of returns filed this year is about 100,000 fewer than at this time last year, said William Henson, manager of the Revenue Department`s document processing division.
About 1.9 million returns have been filed out of about 4.8 million expected.
”Right now, about 70 percent of the returns coming in have refunds,”
Henson said. ”People who have refunds are turning them in early, which is historically the trend.”
About 10 percent of the returns have mistakes, said Shirley Gross of the Revenue Department`s processing operations. The most mistakes-perhaps reflecting the most anger-are on senior citizens` returns.
”I think the ones who`ve been the most upset have been the senior citizens,” Adorjan said. ”Most of the others have had most of their frustrations worked out before they get to the state return.”
Loss of the extra personal exemption has many older taxpayers in an uproar. The new federal law allows senior citizens to take only one exemption per person, rather than two, and the state has followed suit.
But many senior citizens are continuing to take exemptions, Gross said. That probably ranks as the most common mistake in state returns this year, she said.
Another common error deals with the amount of pension and Social Security income that`s deductible on the state form on line 4c. Many people are using the same figures they put on lines 16a and 20a of the federal 1040, inadvertently and incorrectly raising their taxable income. On the federal form, those two lines ask for the total amounts received, regardless of whether the sums are subject to taxes.
Illinois` form requires not the total amount but the amount that`s not taxable. Items listed on lines 4a through 4g on the state form are deductions, not income.
Illinois also has noted a large number of returns filed with a photocopied second page. The back page of the tax form includes a worksheet for figuring the real estate property tax subtraction. Apparently people are making mistakes on the original and are sending in photocopies.
Though there`s nothing illegal about filing a copy, doing so turns the one-page Illinois return into two pages, Hensen said.
”We`d rather see taxpayers use the department`s authorized tax form than a photocopy,” he said.
For people who still are confused, the Department of Revenue offers some help.
People who need tax forms should call, toll-free, 1-800-624-2459. The six employees who answer that line can honor requests for any kind of tax form required by Illinois, ranging from corporate and individual tax income forms to sales tax and partnership returns, said Deborah Langan, manager of the taxpayer information division.
All tax forms are mailed free.
People who have questions about what is taxable, how taxes should be computed or other technical issues should call 1-800-732-8866. The 18 service representatives in that division have been handling some 11,000 questions a week.
The hearing-impaired should call 1-217-785-4270. That is not a toll-free number.
