ANNAPOLIS – Changes in federal tax laws on capital gains have brought headaches to taxpayers and business to accountants, who have seen frustrated customers wander in with forms they can no longer decipher.
Aaron Bloom, a Baltimore accountant for 15 years, said at least 20 new clients have come to him with the new capital gains tax forms this year, saying, “I can’t do this anymore.”
Tax filers said they have also found themselves stumped this year by bad information — or late information. They said some brokerage firms have failed to report a client’s capital gains or they have sent out bad information based on the old law.
Those two elements “spooked” accountants early in the filing season and led to early returns coming in later than usual, said a spokesman for the Maryland Comptroller’s office.
Marvin Bond said the usual early surge of returns in February, followed by a lull and another surge around April 15, has been replaced this year by a slower filing pace with no peaks and valleys.
“It’s been a steady season,” said Bond.
He said returns had caught up to their normal pace as of Friday, however, with about 70 percent of federal and state returns filed in Maryland.
Bernie Leibtag, an Owings Mills accountant who was behind his pace of last year, said Thursday that his biggest headache this year has been getting the right numbers for his clients who have capital gains.
“The law made things more complicated,” said Leibtag. “But it’s a matter of being aware of it and tracking down the necessary information.”
That information is complicated by the fact that Congress changed the laws in the middle of the year.
The tax rate on capital gains fell from 28 percent on any long-term investment sold before May 6 to 20 percent after that. For those in the lowest tax bracket, the capital gains tax rate fell to 10 percent after May 6.
Congress further complicated the taxpayer’s job by redefining a “long-term” investment in the middle of the year. The tax break applies only to long-term investments.
An asset sold before July 26 was considered a long-term investment if it had been held for 12 months or more. After July 26, the long-term standard rose to 18 months.
The new law also exempted profit on the sale of a home from capital gains — up to $500,000 for a couple and $250,000 for a single person. The old law taxed that profit, unless it was rolled over into the purchase of a more expensive home.
“Congress made it very complex with different dates and different rates,” said Easton accountant Joe Carrico.
Like other accountants around the state, Carrico said he has picked up new business this year because of the changes. Clients who came to him only for advice in past years threw their hands up this year and handed over their entire returns.
Robert D. Hauck, an accountant in Annapolis, is filing returns for about 600 clients this year.
He said he has also had problems getting the information he needs from clients and their brokerage houses this year for the new capital gains tax laws.
Hauck still had 100 returns left to file Thursday, more than at the same time last year. But he and the others said they were coping and expected to meet the April 15 deadline.
“We have it pretty much together here,” Hauck said. “I’ve been through the drill so many times, there’s no sense in getting upset. That’s just the way it comes down the pipe.”