Tax trends: What Google searches tell us

April 15, 2011

A Google search page is seen through the spectacles of a computer user in Leicester, central England July 20, 2007. REUTERS/Darren Staples It’s the final stretch of tax season for most taxpayers. One way to gauge what is on the minds of filers this year is to look at the world’s virtual watercooler: Google. Here are five noteworthy tax-related search trends.

Searches for “unemployment taxes” are down.
Searches for “unemployment taxes” dropped 17 percent when you compare January 2010 to January 2011, according to data compiled for Thomson Reuters by Aaron Stein, a Google spokesman in New York. Google Insights breaks search data down by region — although the top states change constantly. In the most recent week, residents of Michigan, Ohio and Pennsylvania topped the list for unemployment-related tax searches, Stein says. (See chart.)

Is the drop in unemployment-related searches a hidden economic indicator of sorts? Or does it mean folks have exhausted their unemployment benefits and do not need to claim them? Kathy Pickering, executive director of H&R Block’s Tax Institute, says it is too soon to tell. However, she says requests for information about foreclosures and cancellation of debt — not exactly rosy signs of national fiscal health — are outpacing unemployment-related topics.

Married … and gay.
Some same-sex married couples are refusing to file their federal tax returns separately this tax season in protest of federal law that does not recognize same-sex marriage, reports the New York Times. Within the lesbian, gay, bisexual and transgendered community, this growing movement is called “Refuse to Lie.” Searches for “Refuse to Lie” started to spike in February, according to Google’s data.

And yet, this the first tax season in which many gay and lesbian couples can file federal income tax returns reflecting new community property rules, which the IRS spelled out in a legal memorandum last summer, reports Reuters contributor Amy Feldman. If this affects you — and it may if you live in California, Nevada or Washington — you’ll need to sort your way through the thicket of community property rules. A good place to start is this lengthy explainer by tax attorney Kaye Thomas of Fairmark. While complicated, the new division could result in substantial tax savings for some couples; if that turns out to be the case, you can go back and amend prior years’ tax returns. This NPR story has more details.

Filing taxes can be especially complicated for gay couples. “We get a ton of questions on that,” H&R Block’s Pickering says. And because the laws are so complex, she suggests speaking to a tax professional.

Tax breaks for education.
Searches for “American Opportunity Credit” are up 46 percent in 2011 compared to April 2010. The American Opportunity tax credit provides tax savings of up to $2,500 per eligible student. This credit is available, however, for only the first four years of undergraduate education. If you or your child is on the five-year plan, you will need to look into other tax breaks for education costs starting with year five.

Retirement savings.
Retirement-related searches peak in January and this year’s were 34 percent higher than last year. That may explain why people are stashing away more money for retirement this tax season. (Remember, retirement contributions can help reduce taxable income.) According to Fidelity Investments, the average contribution to a Fidelity Individual Retirement Account (IRA) for 2010 was approximately $3,450, up nearly 9 percent over 2009. And the average contribution is up almost 16 percent over 2008 — the year the financial markets collapsed. At Charles Schwab, new traditional IRA accounts are up 6 percent year-over-year (through February) and 24 percent from 2009 to 2011, according to a spokeswoman.

As a reminder, individuals can put $5,000 in an IRA for tax year 2010 and 2011. If you are age 50 and over, you can make an additional catch-up contribution of $1,000 by the end of the tax year.

Another reason search requests may be on the rise: Fidelity says it receives approximately 45 percent of all annual IRA contributions within the 28 days leading up to the tax deadline, as many investors make contributions in March and April for their prior year tax contribution.

When is tax day?
April 15 is the day we all associate with taxes. But thanks to Emancipation Day, which is celebrated on that date this year in Washington, D.C., taxpayers have three extra days to file their taxes in the current tax season. As a result, search volume for information about the tax filing deadline is “way above average,” says Stein, with a 62 percent increase in April 2011. Residents of Georgia seem to be the most confused about the tax deadline, which is April 18.

Another search term that’s popular this tax season? “Tax extension.” That term has seen an uptick of 68 percent in the past week. In fact, even H&R Block’s Pickering hasn’t filed her taxes yet. “I’m filing for an extension,” she admits.

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Here is what I googled for this year (and never before) “what to do if you can’t pay your taxes?” and “offer in compromise” and “how to installment payment IRS”…and yes, I also did search for filing an extension, but ultimately didn’t need to.

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