Who Should File a 2012 Tax Return?

Posted by Sanket Shah | International Tax | Tuesday 29 January 2013 5:04 pm

If you received income during 2012, you may need to file a tax return in 2013. The amount of your income, your filing status, your age and the type of income you received will determine whether you’re required to file. Even if you are not required to file a tax return, you may still want to file. You may get a refund if you’ve had too much federal income tax withheld from your pay or qualify for certain tax credits.

Even if you’ve determined that you don’t need to file a tax return this year, you may still want to file. Here are five reasons why:

1. Federal Income Tax Withheld.  If your employer withheld federal income tax from your pay, if you made estimated tax payments, or if you had a prior year overpayment applied to this year’s tax, you could be due a refund.

2. Earned Income Tax Credit.  If you worked but earned less than $50,270 last year, you may qualify for EITC. EITC is a refundable tax credit; which means if you qualify you could receive EITC as a tax refund. Families with qualifying children may qualify to get up to $5,891 dollars.

3. Additional Child Tax Credit.  If you have at least one qualifying child and you don’t get the full amount of the Child Tax Credit, you may qualify for this additional refundable credit. You must file and use new Schedule 8812, Child Tax Credit, to claim the credit.

4. American Opportunity Credit.  If you or someone you support is a student, you might be eligible for this credit. Students in their first four years of postsecondary education may qualify for as much as $2,500 through this partially refundable credit. Even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student. You must file Form 8863, Education Credits, and submit it with your tax return to claim the credit.

5. Health Coverage Tax Credit.  If you’re receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, you may be eligible for a 2012 Health Coverage Tax Credit. Spouses and dependents may also be eligible. If you’re eligible, you can receive a 72.5 percent tax credit on payments you made for qualified health insurance premiums.

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List of IRS forms that 1040 filers can begin filing in late February or into March 2013

Posted by Sanket Shah | International Tax | Tuesday 29 January 2013 2:43 pm

The following tax forms will be accepted by the IRS in late February or into March after updating forms and completing programming and testing of its processing systems.  A specific date will be announced in the near future.

Form 3800 General Business Credit
Form 4136 Credit for Federal Tax Paid on Fuels
Form 4562 Depreciation and Amortization (Including Information on Listed Property)
Form 5074 Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands
Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations
Form 5695 Residential Energy Credits
Form 5735 American Samoa Economic Development Credit 
Form 5884 Work Opportunity Credit
Form 6478 Credit for Alcohol Used as Fuel
Form 6765 Credit for Increasing Research Activities
Form 8396 Mortgage Interest Credit
Form 8582 Passive Activity Loss Limitations
Form 8820 Orphan Drug Credit
Form 8834 Qualified Plug-in Electric and Electric Vehicle Credit
Form 8839 Qualified Adoption Expenses
Form 8844 Empowerment Zone and Renewal Community Employment Credit
Form 8845 Indian Employment Credit
Form 8859 District of Columbia First-Time Homebuyer Credit
Form 8864 Biodiesel and Renewable Diesel Fuels Credit
Form 8874 New Markets Credits
Form 8900 Qualified Railroad Track Maintenance Credit
Form 8903 Domestic Production Activities Deduction
Form 8908 Energy Efficient Home Credit
Form 8909 Energy Efficient Appliance Credit
Form 8910 Alternative Motor Vehicle Credit
Form 8911 Alternative Fuel Vehicle Refueling Property Credit
Form 8912 Credit to Holders of Tax Credit Bonds
Form 8923 Mine Rescue Team Training Credit
Form 8932 Credit for Employer Differential Wage Payments
Form 8936 Qualified Plug-in Electric Drive Motor Vehicle Cred

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IRS To Accept Returns Claiming Education Credits by Mid-February

Posted by Sanket Shah | International Tax | Tuesday 29 January 2013 11:33 am

On January 28th, 2013, the Internal Revenue Service announced that processing of tax returns claiming education credits will begin by the middle of February. 

Taxpayers using Form 8863, Education Credits, can begin filing their tax returns after the IRS updates its processing systems. Form 8863 is used to claim two higher education credits — the American Opportunity Tax Credit and the Lifetime Learning Credit.

The IRS emphasized that the delayed start will have no impact on taxpayers claiming other education-related tax benefits, such as the tuition and fees deduction and the student loan interest deduction. People otherwise able to file and claiming these benefits can start filing Jan. 30.

As it does every year, the IRS reviews and tests its systems in advance of the opening of the tax season to protect taxpayers from processing errors and refund delays. The IRS discovered during testing that programming modifications are needed to accurately process Forms 8863.
 
The IRS remains on track to open the tax season on Jan. 30 for most taxpayers. The Jan. 30 opening includes people claiming the student loan interest deduction on the Form 1040 series or the higher education tuition or fees on Form 8917, Tuition and Fees Deduction.

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IRS Announces Simplified Option for Claiming Home Office Deduction

Posted by Sanket Shah | International Tax | Wednesday 16 January 2013 3:41 pm

On January 15, 2013, the Internal Revenue Service (“IRS”) announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet.

This will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions.  Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option. 

The new simplified option is available starting with the 2013 return which most taxpayers will be filing early in 2014.

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2013 Revised Tax Rates

Posted by Sanket Shah | International Tax | Tuesday 15 January 2013 12:49 pm

On January 11, 2013, Internal Revenue Service announced annual inflation adjustments for tax year 2013, including the tax rate schedules, and other tax changes from the recently passed American Taxpayer Relief Act of 2012.

The revised tax rates are as follows:

The other changes that are of great interest to most taxpayers include the following:

1. The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.

2. The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).

3. The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $250,000 ($300,000 for married couples filing jointly). It phases out completely at $372,500 ($422,500 for married couples filing jointly.)

4. The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).

5. The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $5,891 for tax year 2012.

6. Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.

7. For tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).

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IRS Plans Jan. 30 Tax Season Opening For 1040 Filers

Posted by Sanket Shah | International Tax | Friday 11 January 2013 11:40 am

Following the January tax law changes made by Congress under the American Taxpayer Relief Act (ATRA), the Internal Revenue Service announced today it plans to open the 2013 filing season and begin processing individual income tax returns on Jan. 30.

The IRS will begin accepting tax returns on that date after updating forms and completing programming and testing of its processing systems. This will reflect the bulk of the late tax law changes enacted Jan. 2. The announcement means that the vast majority of tax filers — more than 120 million households — should be able to start filing tax returns starting Jan 30.

The IRS estimates that remaining households will be able to start filing in late February or into March because of the need for more extensive form and processing systems changes. This group includes people claiming residential energy credits, depreciation of property or general business credits. Most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension.

“We have worked hard to open tax season as soon as possible,” IRS Acting Commissioner Steven T. Miller said. “This date ensures we have the time we need to update and test our processing systems.”

The IRS will not process paper tax returns before the anticipated Jan. 30 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.

“The best option for taxpayers is to file electronically,” Miller said.

The opening of the filing season follows passage by Congress of an extensive set of tax changes in ATRA on Jan. 1, 2013, with many affecting tax returns for 2012. ‬While the IRS worked to anticipate the late tax law changes as much as possible, the final law required that the IRS update forms and instructions as well as make critical processing system adjustments before it can begin accepting tax returns.
The IRS originally planned to open electronic filing this year on Jan. 22; more than 80 percent of taxpayers filed electronically last year.

Who Can File Starting Jan. 30?

The IRS anticipates that the vast majority of all taxpayers can file starting Jan. 30, regardless of whether they file electronically or on paper. The IRS will be able to accept tax returns affected by the late Alternative Minimum Tax (AMT) patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

Who Can’t File Until Later?

There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.
The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won’t be accepted until later is available on IRS.gov.

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 as smooth a tax season as possible under the circumstances.

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Fiscal cliff deal raises 2013 tax rates

Posted by Sanket Shah | Newsletters | Saturday 5 January 2013 3:54 pm
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