(00:00:00) I was struck by another unusual fact, we are only about a week away from the state income tax. And for that matter the federal income tax filing deadline. One of our guests just handed me a piece of information indicating that some 500 thousand minnesotans wait until the last three or four days to file their income tax forms. And when we were planning this question and answer session on state income taxes, I thought well, this is really foolish because we're missing most of the people who will have questions most people have filed by now, but apparently that's not true at all. I want to welcome to midday. Asthma Evans who is is in the publication's office at the Minnesota Department of Revenue. And with her is West shag said who is a tax examiner for the revenue department and to both of you I guess it is never too late to answer questions about taxes. Is that right as me. (00:00:49) It doesn't seem like the questions ever (00:00:51) stop up until the last hour of the last day open, right? That's a that's a question we'll get to a bit later on is what provision there is for people who simply They can't get it all done by the 15th and have to request an extension but that's later. We'll cover some of the basic questions first. First of all, how many returns have been filed so far state income tax (00:01:10) returns as me. Well, it looks like about half of the returns. We expect have already come in the total we're expecting to see this year is over 2 million actually about two million three hundred thousand and so far we've gotten 1,200,000. That's by the end of April. I'm the end of (00:01:27) March. We're a little bit behind this year. Is that right? (00:01:29) That's right. So far we've received about 15 thousand fewer returns. Then we'd expected to receive (00:01:36) and another fact that you noted for me here in my little crib sheet that you handed me just before the interview is that about a third of all of the returns are received in the last 10 days and I guess I don't know what we could say is that prudent planning on the part of taxpayers to wait till the last minute. (00:01:52) Well, it's kind of prolonging the agony. I don't really think I'd call it prudent. (00:01:56) I suppose in some cases though. Not all the records can be He accumulated in time to file early on so some people have to wait. (00:02:04) Lots of people have to wait until they can get material from out of state or just even getting your W-2 forms and all of the other information together (00:02:13) West shag. Stead is with us to give us the very specific answers to very specific questions that some of you may have and I suppose we have to keep in mind too that not all questions can be answered to the satisfaction of everyone because some situations are extremely complex and for that you might need a face-to-face conversation with the tax consultant. Is that right Wes, (00:02:35) yes, and for those individuals that have specialized problems that we do have the telephone answering that that the individuals can call in with their specific problems that possibly won't be answered on the radio over the radio. (00:02:55) And yeah now let's remind people right now as soon as made to get a pencil and paper. Because in a few minutes, we'll be giving out some telephone numbers telephone numbers which are already printed on the front of the 1978 Minnesota income tax form, but we'll give the numbers out just in case you don't have the form handy and we'll also be giving out some numbers for a Minnesota Public Radio that you can call because in about 10 minutes or so as met in West will be answering your questions questions from listeners, but before that we want to get some general things out of the way, what are the most common errors that you are noting so far this year. I'll put it to West (00:03:31) First. Well some of the say outside of the normal one of ten of computation errors addition subtraction that normally are made by all individuals the one thing on a tax return that there's a lot of adding up a figures and subtracting a figures and it's easy to make a mistake in that regard. I'd almost suggests individuals to prepare their return one day. Set it aside for a day pick it up at a later time and go over and verify the figures that it's much easier than than verifying it right after you do it. There's a chance that you'll make the same mistake again (00:04:13) and presumably the taxpayers. Perhaps could have missed something too in the way of an addition right Amy remember a day later (00:04:21) outside of the computation errors. There are some changes this year on the Minnesota return and the taxation of income from all sources for residents of Minnesota including out of state income taxable there certain errors that are made in the taxing of income. That normally hasn't been taxed before. (00:04:44) Let's stop at that one for just a moment with so let's talk about that that change in income from other states for Minnesota residents. Can you give us a simple example of how that might (00:04:55) work? Well suppose that an individual Moved to Minneapolis st. Paul area from Wisconsin and possibly had a home in Wisconsin and instead of selling the home that they decided to rent it out. And if they rented out for a profit in Prior years prior to 1978, Minnesota would not have taxed that rent income beginning in 1978. Minnesota will tax that rental income even though the property is located in Wisconsin. (00:05:30) And presumably the other state is taxing the (00:05:32) acting at as well Minnesota. Then would allow a credit on the Minnesota return for the taxes paid to the other (00:05:38) state any any indication of a court test on that new (00:05:43) provision. Well, it's the indications are from telephone calls that possibly some people would have it in mind but with the return still to be filed that that the test would be sometime in the future if there is one (00:06:00) Well, you were proceeding with other changes that we should note. Was there anything (00:06:03) else? Well in the area of Pensions that in previous years that all governmental pensions are fully excluded on the Minnesota return now beginning in 1978. All pensions will be taxable to Minnesota. There is a provision allowing for up to of $7,200 exclusion for all pensions. But that exclusion maximum is reduced by Social Security and other items (00:06:32) any idea where sore as me on how many people are affected by that new provision the taxation of (00:06:38) Pensions, I really don't know right off hand of the of the (00:06:42) number. Yeah. I'm imagining that not too many people might have a government pension over $7,200, but I have no way of knowing (00:06:49) well the way the new law Works those people who had pensions from private sources now, we'll be able to possibly to exclude some of that pension income on the other hand as well. Those who had government pensions will now have to include some of that income. (00:07:05) That's a that could be complicated. I (00:07:06) think one of the one of the problems in that area that that comes up is that $7,200 figure has to be reduced by Social Security received. And so if they're receiving say $4,200 a social security, then the exclusion drops down to three thousand dollars so that there there would be a number of individuals that would fall in that category that would be receiving a pension in excess of the three thousand dollar limitation before we scare anyone off though. I'd like to remind everyone who might qualify for this exclusion that there is a worksheet in the back of the booklet just follow the steps on the worksheet and you won't have to remember any of these details about what's excluded or (00:07:52) reduced. Okay. So the forms lay it out pretty clearly right? All right, we know that there was a noble experiment perhaps a last year. I guess it was with revising the writing of the state income tax forms and There has been some considerable Improvement. (00:08:07) Apparently. Well, thank you. That's good to hear. We are keeping on with our attempts to make the instructions simpler and easier to understand I ran some tests on the instructions and they're coming out at around an eighth or ninth grade reading level. Let me just say that an eighth or ninth grade reading level doesn't mean that only Aether ninth graders will understand it an eighth or ninth grade reading level puts our instructions on about the same plane as almost news magazines time or Newsweek. For (00:08:37) example, yeah, and I can imagine that a lot of people are still it doesn't matter the level of writing. It is still the complication of moving from one portion of the booklet to another and keeping (00:08:47) track right? We just don't want to make things any harder than we absolutely have to yeah. (00:08:51) We have other questions about Homestead and renter's credit provisions and how those credits may have changed and we'll get to those questions in just a moment as well as Provisions for filing late forms. But before that will give out a telephone number. At NPR that you can call and will place you in a holding pattern so that you can just get your questions in a few minutes to as May Evans and Wes shag stat both from the Minnesota Department of Revenue who are here today on midday to answer your questions in the Twin Cities area. You can call us at 2 2 1 1 5 5 0 if you have questions about state income taxes these folks work for the state of Minnesota. They do not work for the Internal Revenue Service. So these are questions about state income taxes at Twin Cities. Number two, two one one five five zero and listeners outside the Twin Cities area, but living with in Minnesota can place a call on our toll-free line to ask a question that toll-free number is area codes 800 or I should say the code is one 800 695 to 9700. Once again that toll-free number for people living with in Minnesota outside. The Twin Cities is one 800 695 to Nine seven zero zero if you have questions about state income taxes, what about the homestead and rent credit Provisions how have they changed (00:10:14) with there really is no drastic change in the property tax refund including the rent refund this year as compared to last year. Basically, the form is the same no real differences in the law itself those individuals that qualified last year undoubtedly would qualify this year circumstances being the (00:10:39) same. Is it your feeling that people are getting smaller homestead credit amounts and smaller rent credit amounts this year than (00:10:45) last the only reason necessarily that that would be true is that their income has increased from last year to this year and as it is based on the income or the amounts of money available to spend for property taxes that as the income increases the Would tend to decrease (00:11:06) what is the percentage of state income tax forms that are audited as may all toss that to you and you'll toss it the West's okay. (00:11:15) Well, basically, I don't know the exact percentage. It would be a small percentage leave one two, two and a half percent roughly maybe in that general area (00:11:27) and once their audited is that a computer selection process by the (00:11:31) way only in part is basically that any return that would be selected for audit based on the criteria. That would be put in would be say a pre-audit would be made of the return glancing over the return and if there is information on the return which indicates backup support of certain deductions and whatever that then quite possibly the return would not be selected. One of the things that I'd say, you know in regard to what individual should attach to the their return when they're sending it in it certainly you don't want to attach everything to the return but the more detailed explanation that you can put with the return if you have an unusual deduction the better it is because if it is selected that it's more readily explained before they contact (00:12:30) you what would fall into the category of an unusual (00:12:32) deduction. Well say unusually high medical expenses that could easily be a circumstance where an individual would have some sort of ailment that would mean that there were numerous doctor expenses or drug expenses and say a short explanation of along with the return may very well be helpful, you know, (00:13:00) Now once the once the unfortunate minnesotans who have had their return selected for auditing have been notified of the process what happens then is there a personal visit with a tax examiner such as yourself West and to go over the (00:13:15) form? Yes, depending upon what items are being audited either there be a request that the individual appear at our office in st. Paul or regional office or that an appointment would be made to meet with the individual at the place of where the records are kept. If it would be a business audit where the information that would have to be brought in would be substantial. (00:13:44) What is the appeal process then if the state and the individual taxpayer simply can't come to agreement on what is what is (00:13:52) due? Well the steps that would that would take would be that initially this the department of What issue and audit report proposing certain adjustments to the return there is a 60 day period see I believe it's a 30-day period that the individual would have to file a protest and this is within the department itself and say he the protest there is a hearing would not be with the examiner that made the initial audit but possibly his supervisor if that fails and that the audit report is then goes through the rest of the procedure and and order as made that this amount of the state says this amount of money is owing that the individual has 60 days to file an appeal with the tax Court. And after the hearing in the tax Court, the further appeal then would be directly to the state supreme court (00:15:02) and I imagine that doesn't happen too (00:15:04) often. No, it's one of the items that the tax court changed. It was made Fairly recently. I think in 1977 for small Tax Matters. I think it's under $2,500 that the person can Avail himself of a small claims procedure in Tax Court in which case there is no appeal from the determination. That would be made. (00:15:33) The time now is about 26 minutes before one o'clock. We're talking with Wes shag stat from the Minnesota Department of Revenue and also asthma Evans Wes is a tax examiner as May is in the publication's office. And as we mentioned before this conversation began first, I should mention we're talking about questions about your state income taxes the lines in st. Paul are open right now. We'll give out the telephone numbers. Once again before we get to some weather information just delivered to us in the Twin Cities area. You can call if you have a question about state income taxes. The number is 2 2 1 1 5 0 0 the lines are open now 2211550 and the toll-free number for those of you living outside the Twin Cities, but with in Minnesota is one eight hundred six five two 97008 hundred 6529700. The National Weather Service says that (00:16:33) the (00:16:33) Cold front that has been pushing through our region passed through the Rochester vicinity or I should say announced its presence in the Rochester vicinity about 35 minutes ago. And the weather in the Rochester vicinity has deteriorated very rapidly. The front is accompanied by Gusty winds in excess of 50 miles per hour visibilities in open areas are near zero is that front continues through Southeastern Minnesota and the conditions are expected to exist according to the National Weather Service for about two hours after the passage of the front. Then Skies should start improving a bit in the blowing snow should should stop at noon today the highway patrol advised no unnecessary travel until conditions improve in the Rochester and Southeastern Minnesota vicinity will keep you up-to-date on that weather information at noon in the Twin Cities 19 degrees Fahrenheit. That is -7 Celsius with a wind gusting to 46 miles per hour from the West very unusual spring storm for our area the Question that we began our conversation with was what right minnesotans have to file a late form as May. What are the provisions for not meeting the April 15th deadline? (00:17:42) Well, if you need an extension of time because you can't get all of your materials together. All you have to do is attach a copy of your federal extension to your Minnesota return. If for some reason you don't need an extension on your federal return and you do need a Minnesota one, there's a special form. You can call us and get its em, 522 E. I believe I would like to say though also that you can't get an extension because you don't have enough money to pay your taxes so you can get extensions for other reasons, (00:18:17) but what do you do? If you don't have the money (00:18:19) you don't have the money go ahead and file your return pay as much as you can and that will if nothing else cut down on interest and penalties. (00:18:27) Mmm that That did that but there will be interest in there will be penalties penalties. If you can't pay the entire some me is that (00:18:35) right? Yes, it will be also in regard to the request for an extension of time to file an approved extension would mean that the penalty would not be assessed but interest does continue (00:18:50) now at the rate of (00:18:52) 8 percent per year and simple rate of (00:18:55) interest, you know, how soon do you think minnesotans who are due a refund will be getting their refunds from state income taxes. (00:19:02) They've been going out within our five week goal this year so far, but anyone who hasn't filed yet shouldn't get his or her hopes up people who wait this long may very well wait longer than five weeks for their refunds. (00:19:15) And as we pointed out there are probably about at least half a million minnesotans who have not filed to their state income tax forms yet. Is it right? That's right. We have a caller on the line with a question and we'll get to that question in just a moment. We'll ask as man. West to put their headphones on so they can hear the question 2 and a reminder that we'll be hearing news headlines just before 1 o'clock followed by weather information will take the first question. Good afternoon. You're on the air. Yes, sir. What is the percentage of chances of being examined by Minnesota as opposed to first being examined by the federal and then having it bounce the over to Minnesota. In other words how much initial examination do you make of an individual taxpayer? (00:19:58) Well, I don't have the figures of the numbers, you know on a percentage wise but I would as an offhand guest I would suppose that it would be roughly maybe a little over 1% (00:20:10) other words the federal examines about 3% adieu get all of those naturally and then you would do one percent over and above that you (00:20:19) well the last the last figure that I saw actually on the federal was maybe in the neighborhood of one and a half possibly 22. I haven't heard that that it was 3% (00:20:33) I have I had heard to that they had reduced their examination rate in a partly in an attempt to shave off save money. Yeah, right that that brings up an interesting point though. Thanks for your question at the collar raised. How do the federal and state authorities cooperate in these auditing procedures? (00:20:51) Well, there is an exchange of information so that if the state would audit a Turn that the federal government is notified of the results of that audit and the reversal of that. The state is advised of any changes that the federal makes on any returns of residents of in Minnesota. (00:21:12) And the number in the Twin Cities again to call if you have a question for essay or Wes is 22115502211550. That's where the Twin Cities the toll-free number is 1-866-560-4440 (00:21:30) why we have a break here, I that one of the problems that exists in the filing a state returns this year and possibly causing some of the delay in in a number of people filing is because of some federal changes that were made late last year that as of this date still is not have not been adopted by the state legislature. For example The federal government or the Congress increased the deduction for long-term capital gains from 50% to 60% effective for transactions after October 31st. So a lot of individuals that would fall into the category of having sales in the last two months of 1978 as it stands right now, the state deduction of long-term capital gains is 50% the Federalists 60% for that period so individuals may be holding back waiting to see what the legislative State Legislature does regarding (00:22:39) that, you know, there will be action on that too. We have another caller on the line with a question about state income taxes will go to that question now, good afternoon. You're on the air. Hi. I'm calling from Moorhead and I wondering about the circuit breaker. Is that on property taxes for the current year or the previous year? (00:22:59) Well, the computation for the property taxes would be based on the property taxes payable in 1979. Well, the as I understand it the statements for the year 1979 should be available of the property taxes owing. You know for this current year now. (00:23:23) No, we haven't gotten our eyes (00:23:24) yet. Well have you checked with the courthouse regarding it? (00:23:29) No, we haven't they usually come in a meal. Fairly early in the spring but then usually after we filed our income (00:23:36) tax. Well, there was an attempt by the legislature to ensure that the filing of the property tax statements would be occur earlier in the year because of this problem and as I understand it that most would be out say February or March at the latest, but I it may be good to just check with the courthouse if there is a delay in getting the property tax statement out the one thing on the property tax return for individuals that are not senior citizens and not disabled who are homeowners that the return must be filed that the credit itself cannot be claimed on the property tax return and for all individuals that the claim for the property taxes can be filed separately. (00:24:28) That's an interesting problem of coordination Wesson as me that problem of not getting the Property tax statement from the municipality you may live in how widespread is that problem? (00:24:39) Well, this is a few years back that it was much more of a problem. The attempt was made so that they speed it up the property tax statements so that at least in the metropolitan area that I'm sure that most individuals have received their property tax statement by now as me. If you haven't received your property tax statement yet. Remember you have until the end of August to file your property tax refund that does not have to come in in the middle of (00:25:07) April a good point. Yes by all means, you know earlier we were talking about this sharing of information that occurs between the federal and the state when there is an audit that takes place what about the confidentiality of state income tax returns, in other areas who has access to our financial information that we present to you the state in our tax (00:25:26) forms. No one that the the information is strictly confidential. Anshel between the taxpayer and the Department of Revenue. The governor does not have the right to look at anybody's return. No one in the legislature has a right to look at anyone's return or no one in state government has the right to look at anyone's return (00:25:48) any other Federal agency other than the department of the treasury or (00:25:51) IRS. Our only contact is with the Internal Revenue Service as far as the federal agencies one that exception to the rule there is a sharing of one specific type of information in regard to the Department of Transportation. Whereby the state can advise the Department of Transportation those individuals who are claiming the blind credit on the Minnesota return. Oh I see this is to ensure that the individuals are checked then regarding driver's license and is primarily for the protection of the individual (00:26:30) now if Of the reasons that minnesotans are a bit behind in filing their state income tax returns is because they think they may have to pay money that may be refuted by a piece of evidence that you have as many as that (00:26:42) right. Well, it looks like refunds are up. The average amount going out now is around two hundred and $36 and overall 75 to 85 percent of those who file do get refunds (00:26:55) that seems like a high rate of refund. Although that's dependent to of course on dependent are on exemptions claimed for the forms are presume. Right? Well, I want to thank both of you for joining us today to answer questions about state income taxes as May Evans from the publication's office at the Minnesota Department of Revenue and joining her Wes shag, stead of tax examiner. I wish both of you good luck and good Fortunes in your work. I'm sure your work is just starting I suppose West especially you'll be up to your ears with paperwork pretty (00:27:24) soon. Well, I guess that goes all year long of (00:27:29) paperwork. When asked when is your off season by the way? Rataxes (00:27:34) well, actually that that there's it certainly is true as fire as the returns themselves coming in. You know that this would be the Rush season this and then the next few months. There are amended returns coming in constantly that must be processed and and questions keep coming up throughout the year auditing is done, you know throughout the year. I would like to just wanna mention the telephone number absolutely in the Twin City area that the telephone number to call for information on your tax return to answer. Your questions is two nine six. Three seven eight (00:28:15) one. Two nine six three seven eight one that's for Twin Cities area residents and also on the front of the (00:28:22) form, right? And then we do have a toll free number which is 1 800. Six five two nine (00:28:33) 0949094 that's eight hundred six five two nine 094 as me (00:28:39) one more thing. Our assistance lines will be open on Saturday April 14th from 9 in the morning until one and then again will be open until 6:45 on Monday the 16th of April (00:28:52) 921 on Saturday the 14th. All right, by the way, what is the last word on the advice given over the phone by the tax helpers to taxpayers if the advice how shall we say? Does the advice withstand? Will it stand up in a court of law or at auditing time (00:29:10) if they called in and and asked a specific question got an answer on the phone filed a return according to that if there is a mistake. Say that know that the the correction would be made to the return We hopefully the information that they would receive would be, you know, hopefully a hundred percent. Correct, right? Certainly the errors can occur in in answering the phone one of the problems possibly that could occur would be a misunderstanding either on the part of the taxpayer or on the part of the individual answering the question. (00:29:59) Well good. Thanks to both of you again.