Those Affected by Late Tax Breaks

Posted by Bruce Mc on Jan 7, 2011 in Information, News Flash | 0 comments

The start of the 2011 filing season will begin in January for the majority of taxpayers. However, the last and late changes in the law mean that the IRS will need to reprogram its processing systems for three provisions that were extended in the Tax Relief, Unemployment Insurance Re-authorization and Job Creation Act of 2010 that became law on Dec. 17. 2010.

People claiming any of these three items – involving the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction as well as those taxpayers who itemize deductions on Form 1040 Schedule A — will need to wait to file their tax returns until tax processing systems are ready, which the IRS estimates will be in mid- to late February.

“The majority of taxpayers will be able to fill out their tax returns and file them as they normally do,” said IRS Commissioner Doug Shulman. “We will do everything we can to minimize the impact of recent tax law changes on other taxpayers. The IRS has worked through the holidays and into the New Year to get our systems reprogrammed and ensure taxpayers have a smooth tax season.”

The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the late tax law changes. In the interim, people in the affected categories can start working on their tax returns, but they should not submit their returns until IRS systems are ready to process the new tax law changes.

The IRS urged taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax changes and ensure accurate tax returns.

Taxpayers will need to wait to file if they are within any of the following three categories:

• Taxpayers claiming itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes (add link to Schedule A).  In addition, itemized deductions include the state and local general sales tax deduction extended in the Tax Relief, Unemployment Insurance Re-authorization, and Job Creation Act of 2010 enacted Dec. 17, which primarily benefits people living in areas without state and local income taxes and is claimed on Schedule A, Line 5. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.

• Taxpayers claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit.
• Taxpayers claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

For those falling into any of above three categories, the delay affects both paper filers and electronic filers.

The IRS emphasized that e-file is the fastest, best way for those affected by the delay to get their refunds. Those who use tax-preparation software can easily download updates from their software provider. The IRS Free File program also will be updated.

As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure a smooth tax season.

Updated information will be posted on IRS.gov. This will include an updated copy of Schedule A as well as updated state and local sales tax tables. Several other forms used by relatively few taxpayers are also affected by the recent changes, and more details are available on IRS.gov.

In addition, the IRS reminds employers about the new withholding tables released Friday for 2011. Employers should implement the 2011 withholding tables as soon as possible, but not later than Jan. 31, 2011. The IRS also reminds employers that Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov before year’s end.

Health Care Reform?

Posted by Bruce Mc on Jun 9, 2010 in Information, Opinions, Taxes | 4 comments

Tax Hikes are on the Way. . .

Unfortunately HR3590 is a centipede with lots of feet!!!

My Favorite movie line ever. . .

“And here we go…”

*****

This is part of the new Health Care Bill.

I contacted my Congressman about House bill HR3590 the health care bill that recently passed. I asked for a summary of changes.  The aid directed me to go to www: thomas.gov ; enter HR3590 in the search Box and look for summaries {you’ll need to select ‘Bill Number’ before ‘enter’}.   

Starting in 2011 your W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are given by the company. It does not matter that it is a private concern or governmental body of some sort. 

If you’re retired?   So what?!  Your gross will go up by the amount of insurance you get.  (for *working* military retirees, that’s company benni’s PLUS Tricare)

You will be required to pay taxes on a larger sum of money that you have never seen. You benefited from it but never saw it.

Take your tax form you just finished and see what $15,000 to $20,000 additional gross does to your tax debt. That will give you a good “guess” what you’ll pay next year.  For many it also puts you into a new higher bracket so it will be worse for those folks.

This is how the government is going to buy insurance for those 15% that don’t have insurance and it’s only part of the tax increases.

Not believing this I researched the summaries and here’s what I’m reading:

On page 25 of 29 :

TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS <link, read it here> -(sec … 9001, as modified by sec. 10901)
Sec.9002.  “requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income.”  (taxed at up to 40% by the way) 

Joan Pryde is the senior tax editor for the Kiplinger letter. Go to Kiplinger and read the 13 tax changes that could affect you.

 Number 3 is what I just told you about.

Why am I telling you this? 

“This is going to leave a mark!!”

Form 1040 “New for 2009, Filing”

Posted by Bruce Mc on Oct 29, 2009 in Form 1040 Information, Information, Tax Preparation | 0 comments

            Well the IRS has released its “draft” of the 2009 Form 1040. Clicking the photo on the right will take you in a new window so you can see it if you like. 

The only change in the “Income” section is line 19. It is still for “Unemployment compensation”, but they added the phrase “. . . in excess of $2,400 per recipient (see page 27)” This is done so that those who are not aware (and prepare their own returns) that this is something new. If you need clarification, please visit Unemployment Compensation at the IRS site for Tax Changes for Individuals. 

            In the section for “Adjusted Gross Income”, line 23 now reads, “Educator expenses (see page 29)”. So, what used to be there is “Archer MSA deduction. Attach Form 8853” is no more. For more information on Archer MSA deduction please see Publication 696. 

            Line 34 now reads “Tuition and fees deduction. Attach Form 8917”, it used to be, “Jury duty pay you gave to your employer” This is not something new, just reworded from last years form. 

            Those are the only notable first glance changes to page one. Now . . .

 Page two.  (I did that in my best Paul Harvey voice I could muster.) 

            In the “Tax and Credits” area, line 39c from last year is gone (if you’ll remember this was a “check box” if you increased your standard deduction using your real estate taxes). 

         Line 40 is now “a” and “b”. “A” is the standard “Itemized deductions (from Schedule A) or tour standard deduction” which, as normal is listed on the left side of the form. Now part “b”. This reads “If you are increasing your standard deduction by certain real estate taxes, new motor vehicle taxes, or a net disaster loss, attach Schedule L (a new Form) and check here (see page 35)” and has a corresponding check box.

(I’ll talk more about the new schedules in other upcoming post) 

         Line 42 is the same ol thing but now reads “Exemptions. If line 38 is $125,100 or less and you did not provide housing to a Midwestern displaced individual, multiply $3,650 by the number on line 6d. Otherwise, see page 37” 

         Lines 47 through 55 are the same with two notable differences. This is the credit section of this part. They are rearranged (what was line 47 is now down on line 50 and such). The credit for the elderly or disabled is no longer listed there. Schedule R Although that line has been omitted altogether, the credit has not, it is still a viable credit. You’ll just enter it on line 53 and put a check in the box for other credit forms (this is “c”). 

Okay now for “Other Taxes”, well nothing new in that section. 

In the “Payments” section line 63 reads “Making work pay and government retiree credits. Attach Schedule M”. Again, I’ll talk more about the new schedules in other upcoming post.

          Line 66 “Refundable education credit from Form 8863, line 16” this is new for the American Opportunity Credit.

          So there are the basics of the new form and what is new and so forth. To further prepare yourself for the upcoming filing season please view the instructions for the new 2009 return.

photo credit: nalilo