Changes Impacting Your Tax Return This Year
(NAPSI)—Three out of four taxpayers received a refund from Uncle Sam last year, averaging $2,805. This year’s amount should be about the same, thanks to a few major tax law changes expiring or added during 2011.
Although your bottom line may change little, there are changes you should be aware of for this year’s tax return. "Unless lawmakers extend them, this will be the last year to claim several well-known tax breaks," according to TaxACT spokesperson Jessi Dolmage. "Take advantage of them while you still can. With 2012 being an election year, it’s anyone’s guess as to what changes could be in store for next year’s return."
Before you do your taxes, read this summary of the more notable changes that may affect your federal return this year.
• The filing deadline is Tuesday, April 17, 2012, because April 15 is a Sunday and Washington, D.C., is recognizing Emancipation Day on April 16. Don’t use the later deadline as an excuse to procrastinate, though. When you rush, you’re more likely to make mistakes that could cost you money and time. Furthermore, filing, paying or providing information late will result in IRS penalties that have increased this year.
• Your 2011 tax return could be your last chance to claim one of the credits for energy-efficient home improvements as well as deductions for tuition and fees, educator expenses, mortgage insurance premiums, and the option to include your state and local sales taxes paid as an itemized deduction (in lieu of state and local income taxes paid).
• The Making Work Pay Tax Credit and Alternative Motor Vehicle Credit (unless it was a new fuel-cell vehicle) that you could claim last year have expired. The Making Work Pay Tax Credit was essentially replaced by the payroll tax holiday for 2011, which employees and the self-employed already received in 2011 paychecks through a reduction in FICA-OASDI Social Security taxes. Unlike the Making Work Pay Tax Credit, employees who benefited from the payroll tax holiday don’t need to claim it on this year’s tax return.
• The amount of the Health Coverage Tax Credit decreased to 72.5 percent for qualified health insurance coverage received between March and December 2011.
• If you converted a traditional IRA to a designated Roth IRA in 2010 or rolled over a qualified retirement plan to a Roth IRA, but did not report the taxable amount on your 2010 tax return (due April 2011), you must report half the amount on this year’s return and the other half on your 2012 return. Details are available in IRS Publication 575 at www.irs.gov .
• Amounts for standard mileage, standard deductions, personal exemptions and the Alternative Minimum Tax have increased. Note that there are different standard mileage rates for miles driven before July 1 and after June 30. Details about all increases and other tax law changes can be found in IRS Publication 17.
Online and downloadable tax preparation programs make navigating tax law changes easy. When choosing your software, Dolmage reminds you to carefully weigh your options, especially if you’re using a free solution. "Make sure it covers your tax situation. Many free federal products only cover simple returns, like Form 1040EZ returns. Most taxpayers need forms and schedules that are only included in overpriced solutions."
Dolmage says TaxACT Free Federal Edition is for simple and complex returns, including those with itemized deductions and income from self-employment, investments, rental properties and farms. TaxACT also includes free federal e-filing, guarantees for maximum refund and accuracy, and unlimited free tax help via e-mail.
For more information about tax law changes, visit www.irs.gov and www.taxact.com/taxinfo . Learn more about TaxACT Free Federal Edition at www.taxact.com .
On the Net: North American Precis Syndicate(NAPSI)