Americans don't know jack about taxes

Most taxpayers are clueless about changes to the tax code, according to a new survey, but is that a bad thing?

By David Ellis, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Here's some tax trivia for you: What is this year's deadline for filing your taxes?

If you answered April 15, don't feel bad. In fact, over three quarters of 1,000 people polled in a recent survey failed to answer correctly.

TAXES

Since Tax Day deadline falls on a Sunday this year and because that Monday is a legal holiday in the District of Columbia, this year's tax deadline is April 17.

Granted keeping Tax Day straight is one thing, but other results from the survey, conducted by H&R Block, suggest a much bigger problem: Americans are pretty clueless when it comes to their taxes.

"The need to educate and inform our taxpayers about key issues is greater than ever," said H&R Block tax professional Jackie Perlman.

Take this year's telephone tax refund. It's a one-time refund available to anyone who has paid taxes on a land line, cell phone, fax or Internet phone service from March 2003 to July of last year, with the refund ranging between $30 to $60.

It's not a lot of cash, but according to H&R Block's survey, only about 40 percent of taxpayers know about it. There are even some taxpayers who are - incorrectly - seeking thousands of dollars from the telephone tax refund, according to the IRS.

Even not-so-new tax items were still foreign to a number of Americans, according to the survey.

Almost two-thirds of taxpayers did not know how much the Child Tax Credit is worth (it's $1,000, which is available to parents with dependent children.

And less than half said they were familiar with the Alternative Minimum Tax (AMT), which is affecting a growing number of Americans.

While ignorance can be bliss for those Americans that rely on a tax professional or tax preparation software like TurboTax, a lack of tax knowledge can be quite painful for a lot of Americans.

By not staying on top of changes to the tax law, Americans who handle their own return cannot take steps to minimize their tax bill, or they could miss out on a number of deductions.

Worse than that, they could get a bill from the IRS stating that they owe more money, or worse, face an audit.

Take the AMT for example. A lot of Americans who put together their own return are assuming that it does not affect them. As a result, said Tom Ochsenschlager, vice president of taxation at the American Institute of Certified Public Accountants, people will get a notice from the IRS, stating that they still owe money.

"There are going to be some rude surprises coming to people who didn't think they were filing for AMT," said Ochsenschlager.

So who's to blame?

In all fairness, the tax code is extremely complex, so it's hard to expect the average American without any formal training not to feel frustrated when filing out their annual return.

But it doesn't help that Congress is constantly patching and changing the tax laws.

"Twenty years ago I don't think it was quite as often," explained Bob Scharin, a RIA senior tax analyst from Thomson Tax & Accounting. "And that makes it hard to disseminate the latest info."

AMT: Middle-class more at risk than millionaires

5 tax audit red flags  Top of page

 
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.