2015 tax season underway
by Lauren Thornton Tobin for the FCT
While April 15 may seem a while away, the Internal Revenue Service will begin taking applications Jan. 20 for a Free File system, according to the IRS.gov website.
The Free File system is for taxpayers whose income does not exceed $60,000, the IRS said.
Red Bay mayor, David Tiffin, said although it may only be a small percentage, the tax money from the state helps to keep Franklin County’s roads maintained.
“There is a fund marked for pavement of the streets and street maintenance,” he said in regards to state income taxes. “It’s not a big amount, but it’s enough to keep potholes filled.”
Other taxes such as car tags, tobacco taxes and gas taxes affect Franklin County cities too, Tiffin said.
“I do think the county gets those revenues and a certain percent comes back to the city.” He said.
Tiffin said the city doesn’t usually see a direct impact from tax season as far as city revenue.
“Sometimes people get refunds and they will spend that money on various things, but we don’t see a huge increase,” he said.
Income taxes are used by the government to pay for highways, Social Security and federal employees, said William Foster of Foster and Foster CPA in Russellville.
“If we didn’t pay income taxes, the government would not have the money,” he said. “You have to pay money to get money back.”
Foster said a tax return is money that citizens pay to the federal government the previous year.
“The state is the same thing. We send money to Montgomery and they take care of our roads,” he said.
Foster said there are ways to save on income taxes and use them to help oneself later on.
There are different retirement or 401(k) plans, Foster said.
An individual can set up an Individual Retirement Account where he/she doesn’t pay income tax on the money until it’s taken out of the account for use, Foster said.
“The average tax payer, they’ve got to have a (retirement) plan at work or take out an IRA,” he said.
There is the option of a Roth IRA, where a person pays taxes on the account up front and then invests money every year without worry of paying taxes when the money is taken out, Foster said. This type of account is nondeductible.
People can also save on their deductions by changing the withholdings from their paychecks, Foster said.
For example, a person might want to itemize deductions if those deductions exceed $12,400. Otherwise, he/she might want to file standard, Foster said.
A tax increase was not passed in December for Alabama, Foster said. A tax increase depends on the bracket adjustment by the state. Right now, Alabama has a graduated tax rate with a maximum of five percent.
