ATLANTA – The Internal Revenue Service kicked off the 2012 tax filing season with new and expanded services, and reinstated deductions to help taxpayers.
The agency also encouraged taxpayers and tax practitioners to take a fresh look at the many benefits of e-filing.
“Georgia experience another record breaking year with more than 3.7 million e-filed returns, said IRS Spokesman Mark Green. “Everyone is eligible to Free File! It’s safe, easy, fast and accurate. I strongly recommend that taxpayers try it.”
Other highlights taxpayers should watch for as they file tax returns for 2012:
The IRS began accepting most simple returns on Jan. 30. However, some filers claiming certain credits will have to wait until March to file their taxes because of delays in updating the IRS systems after the tax law changes made by congress under the American Taxpayer Relief Act.
The credits include residential energy credits, and general business credits.
• Reinstated deductions: Several set to expire were reinstated or extended for two years through 2013 including:
State and local sales tax itemized deduction;
Two higher education credits -- the American Opportunity Tax Credit and the Lifetime Learning Credit Qualified tuition and fees adjustment/deduction up to $4,000;
Teacher/educator expense adjustment/deduction up to $250;
Home energy credit - for qualified windows, insulation, water heaters, heating & air conditioners, etc. purchases. The one time credit is $500.
Qualified charitable distribution exclusion of up to $100,000 gifted from an IRA by taxpayers who are age 70½ or older.
• Saver’s credit income limits increased: Contributions to IRAs and retirement plans such as 401(k)s might qualify for a tax credit up to $1,000; up to $2,000 if married filing jointly. The credit is for individuals with incomes up to $28,750, head of household up to $43,125 and married filing jointly with incomes to $57,500. Use Form 8880 to claim the credit.
• Key items for 2013 (not for 2012 taxes):
The standard mileage rate for business use of a car, van, pick-up or panel truck is 56.5 cents a mile for business miles driven. (For 2012 its 55.5 cents per mile)
The 2 percent cut in the Social Security payroll tax was not extended for 2013; Social security and Medicare tax for 2013 - The employee tax rate for social security is 6.2%. Previously, the employee tax rate for social security was 4.2%.
The maximum capital gains tax rises from 15 percent to 20 percent for those taxed at 39.6 percent;
A simplified option is available to claim home office deduction of $1,500 per year
Qualified home mortgage canceled debt exclusion was extended one year through 2013.
IRS Questions and Answers
Q: When should I get my Form W-2 and what should I do if it’s late or wrong?
A: Employers are required to provide or send 2012 W-2s to employees (current and former) by Jan. 31. Contact your employer if you have not received your Form W-2(s) by early February. Call the IRS at 800-829-1040 if you still have not received it by Feb. 15.
Q: What if I think identity theft has affected my tax records?
A: Call the Federal Trade Commission at 1-877-IDTHEFT (438-4338). Go online to the IRS Identity Theft and Your Tax Records web page or contact the IRS Identity Protection Specialized Unit at 1-800-908-4490 for guidance. Hours are 8 a.m. to 8 p.m. Monday to Friday.
Q: How do I know whether to itemize deductions?
A: Nearly two out of three taxpayers take the standard deduction rather than itemizing deductions such as mortgage interest, charitable contributions and state and local taxes. As a general rule, you want to itemize deductions (on Schedule A) if the total amount of deductible expenses is greater than the standard deduction given to you based on your filing status.
Some of the expenses you can include if you itemize are medical expenses that are greater than 7.5 percent of your adjusted gross income, mortgage interest and points, charitable contributions, casualty losses that are usually greater than 10 percent of your adjusted gross income plus $100, unreimbursed job expenses and miscellaneous deductions that are greater than 2 percent of your adjusted gross income.
Q: What can I do to avoid being audited?
A: A percentage of returns filed are selected randomly for audit, so there is no certain way to avoid being audited. Most tax returns are accepted just as they’re filed. Each one goes through a computerized screening. If there are discrepancies, you might receive correspondence from the IRS asking you to verify, correct, or explain information on your return.
Many issues can be dealt with through correspondence alone. The best way to avoid an audit is simply to report all of your taxable income and claim only the credits and deductions you are entitled to by the tax law.
Q: Can a student file a return claiming a personal exemption if the parents list the student on their return as a dependent?
A: No. A student may not claim a personal exemption on his/her own return if the parent qualifies to claim them as a dependent. Generally, the parents may claim a student as a dependent if the child: did not provide more than half of his/her support; is under age 24 at the end of the year and a full-time student; lived with the parents for more than half the year; does not file a joint return, and is a U.S. citizen, national or resident, or is a resident of Canada or Mexico.
Q: What income is considered taxable or nontaxable?
A: Generally, you must include in gross income everything you receive in payment for personal services such as wages, salaries, commissions, fees and tips.
Other items considered taxable income include: fringe benefits, stock options, unemployment compensation including unemployment insurance benefits and benefits paid by a state (may also be subject to Social Security and Medicare taxes), canceled debts and all other items, unless specifically excluded by law, including income in a form other than cash (barter).
Some common items that are not taxable income are: adoption expense reimbursements for qualifying expenses, child support payments, gifts, bequests and inheritances, workers’ compensation benefits, public assistance benefits based upon need (food stamps, Medicare), meals and lodging for the convenience of your employer, compensatory damages awarded for physical injury or physical sickness, welfare benefits, cash rebates from a dealer or manufacturer, work training programs, disaster relief grants and payments and disaster mitigation payments, mortgage assistance payments, payments to reduce cost of winter energy and tax exempt interest from municipal bonds and tax exempt bond mutual funds (must be reported on line 8b of Form 1040 or 1040A.)
Q: Are donations to an individual or family deductible?
A: No. When people give money to directly help a specific individual or family, it is considered a gift rather than a charitable donation and is not deductible. An organization or fund formed to assist a particular individual or family will not qualify as a charitable organization and therefore donations to these organizations or funds are not deductible as a charitable contribution.
Q: How does an employee deduct business expenses?
A: It depends whether your employer reimburses you for business‑related expenses.
If you are reimbursed under an accountable reimbursement plan, it should not be included in your wages on Form W-2, and you should not deduct the expenses.
If you are not reimbursed under an accountable plan, your expenses exceed the reimbursement you received under an accountable plan, or you are not reimbursed at all, you may use Form 2106 or Form 2106-EZ to deduct allowable business expenses.
These expenses are generally subject to the 2 percent of adjusted gross income limit.
Q: Are work clothes and uniforms deductible?
A: Maybe. You can generally deduct the cost and upkeep of work clothes if: the clothing must be worn as a condition of employment, and the clothes are not suitable for everyday wear.
Examples of workers who may qualify: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes and transportation workers (air, bus, rail, etc.).
Q: Is there a tax on inheritances?
A: Normally there is not. Property you receive as a gift, bequest or inheritance is not included in your income. If property you receive in this way later produces income, however, such as interest, dividends or rents, then that income is taxable to you.
If you inherited a pension or an individual retirement arrangement (IRA), you may have to include part of the inherited amount in your income. If you inherited a pension, see “Survivors and Beneficiaries” in Publication 575. If you inherited an IRA, see “What If You Inherit an IRA?” in Publication 590.
This year’s general filing requirements are:
$9,750 (single), $11,200 (single 65 or older); $12,500 (head of household), $13,950 (head of household, 65 or over); $19,500 (married filing jointly), $20,650 (married filing jointly with one 65 or older), $21,800 (married filing jointly with both over 65); $3,800 (married filing separately) and $15,700 (qualifying widow or widower), $16,850 (qualifying widow or widower and 65 or older).
Sometimes it is a good idea to file even though not required by law to do so because the filer might be eligible for a refund. The only way to claim a federal tax refund is to file a federal tax return.
If you worked during the year, for example, and had federal income tax withheld from your wages or made estimated tax payments, that potential refund can only be claimed by filing a federal tax return. By law, unclaimed refunds are forfeited to the U.S. Treasury after three years.
For example LAST YEAR, (Unclaimed refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008. In Georgia, more than $30 million in unclaimed refunds awaits nearly 36,000 individuals).
You can get a six-month extension to Oct. 15 by filling out Form 4868 by April 15. However, you will owe interest on any taxes not paid by April 15.
• $5,950 for singles and married individuals filing separately.
• $8,700 for head of household.
• $11,900 for married filing jointly and qualifying widow(ers).
Additional deductions for those over 65 or blind: $1,450 for single or head of household and $1,150 for married/qualifying widow(er).
Taxpayers whose income is $57,000 or less can access free federal tax preparation software and file returns online for free through a partnership between the IRS and the Free File Alliance using the IRS website, www.irs.gov/freefile.
There is no income limit for taxpayers to use Free File Fillable Forms, which are online versions of paper forms.
The IRS said it issued refunds last year to more than 90 percent of e-filers who opted for direct deposit within 21 days. They expect the same this year. For paper filers, you will generally see a refund within six weeks.
If you file electronically, but opt for a paper check, it should be issued within three weeks from when the IRS processes the return. Refunds from paper-filed amended returns will generally be issued within 8-12 weeks.
To check on the status of your refund, go to www.irs.gov and find “Where’s My Refund?” or call the Refund Hotline at 800-829-1954.
IRS forms, publications
With the decrease in the number of people who still file paper returns, the availability of paper forms is scarcer. Some area libraries may get a limited number of packets, though the latest word is they won’t arrive for about three to four weeks. Call before you go.
It is advised to go online at home or at a library to print out the forms at www.irs.gov. Post offices no longer receive IRS packets, postal officials said. Forms can be ordered at 800-829-3676.
Mark Green is the IRS spokesman for Georgia, South Carolina and Mississippi. Contact him at (404) 338-7886 Office or (678) 644-5851 Cell.