SHATTUCK'S TAX FACTS
IRS plans Jan. 30 tax season opening for individual filers
by Alan Shattuck, CRTP
January 9, 2013
• How the Fiscal Cliff deal could impact your taxes
• Some deduction issues ahead
We have waited a year for Congress and the President to deal with tax issues as part of the Fiscal Cliff issue. Well, just in time and at the last possible moment, Congress and the President both decided it was time to pass The American Tax Relief Act (ATRA)
which takes care of some of the income tax issues for the taxpayers.
The IRS will begin accepting individual income tax returns on January 30, 2013 after updating forms and completing programming and testing of its processing systems. This will reflect the bulk of the late tax law changes enacted January 2, 2013.
This announcement means that the vast majority of tax filers (more than 120 million households) should be able to start filing tax returns on Wednesday, January 30th.
No individual income tax returns will be processed by the IRS before the anticipated opening date. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit. Congress and the Administrative employees get paid as usual, while taxpayers have longer to wait for tax refunds.
The most pressing items for 2012 filers in the ATRA deal with tax provisions that were extended retroactively to Jan. 1, 2012 and extended through Dec. 31, 2013. Some of these items are as follows:
Itemized Deductions – Schedule A:
• Extends for two years (2012 & 2013) the election to take an itemized deduction for State and Local General Sales Taxes in lieu of the itemized deduction permitted for State and local income taxes.
• Premiums for Mortgage Insurance Contracts entered into after December 31, 2006 on a qualified residence have been deductible as qualified residence interest. This revives the deduction for 2012 and extends it through 2013. The Deduction is phased-out ratably by 10% for each $1,000 by which the taxpayer’s AGI exceeds $100,000. Thus the deduction is unavailable for a taxpayer with an AGI in excess of $110,000.
Deductions on Page 1 of Form 1040:
• Revives the Teachers’ Classroom Expense Deduction of up to $250 of a teacher’s qualified classroom expenses for 2012 and extends it through 2013.
• The above-the-line deduction for Qualified Tuition and Related expenses ($2,000/$4,000) in lieu of education tax credits is now revived for 2012 and extended through 2013.
Permanent AMT Patch:
• Increases the exemption amounts for 2012 to $50,600 for unmarried individuals; $78,750 for married taxpayers filing jointly and surviving spouses; and $39,375 for married taxpayers filing separately
• Allows nonrefundable personal credits to the full amount of the individual’s regular tax and AMT
• Provides for an annual inflation adjustment to the exemption amounts for years beginning after 2012
Tax-Free IRA to Charity Contributions:
• Tax-free distributions (up to $100,000) made by taxpayers over age 70 and ½ from individual retirement plans for charitable purposes, which expired at the end of 2011, is now revived for 2012 and continued through 2013. Due to 2012’s passing, a special rule permits distributions taken in December 2012 that are transferred to charities before February 1, 2013 to be treated as a charitable distribution and therefore not taxed in 2012. Another special rule permits charitable distributions made in January 2013 to be deemed made on December 31, 2012.
Tax Free Employer Mass Transit Benefits:
• The excludable employer-provided mass transit benefit is revived to $240 per month for 2012 and continues through 2013.
More details and information will be disclosed in tomorrow’s article including what changes are in store for 2013 and beyond. Over the weekend, I will also be updating for California income taxes.
If you have any questions, please contact me at firstname.lastname@example.org.