Changes impacting your taxes and this year's refund from Uncle Sam
(ARA) — In the way of tax legislation, 2011 was a relatively quiet year. However, that doesn't mean there aren't tax law changes that will affect this year's tax returns.
"The changes enacted at the end of 2010 will still impact this year's and next year's federal tax returns," says TaxACT spokesperson, Jessi Dolmage. "With the debate over the federal budget and taxes unlikely to end any time soon, who knows if the soon-to-be expired tax breaks will be extended. So, take advantage of all your benefits while you still can."
Three out of four taxpayers receive a federal refund, and last year's average refund totaled $2,805. To help you maximize your refund, here are some tax law changes you should know about before filing this year's return.
- Your federal return must be filed by Tuesday, April 17, 2012. April 15 is a Sunday and Washington, D.C., is recognizing Emancipation Day April 16. Don't use the extended 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.
- Amounts for standard mileage, standard deductions, personal exemptions and the Alternative Minimum Tax have increased. Note there are different standard mileage rates for miles driven before July 1 and after June 30. Details about all increases are in IRS Publication 17 at www.irs.gov.
- Among the tax breaks available last year but expired for this year are the Making Work Pay Credit and Alternative Motor Vehicle Credit (unless it was a new fuel cell vehicle). The Making Work Pay Credit was essentially replaced by the payroll tax holiday for 2011. Employees and self-employed already received the tax benefit in 2011 paychecks through a reduction in the FICA-OASDI Social Security taxes. Unlike the Making Work Pay Credit, employees who benefited from the payroll tax holiday don't need to claim it on this year's tax return.
- Unless lawmakers extend them, this will be the last year to claim the following breaks: Tuition and Fees Deduction, Nonbusiness Energy Credit, the refundable Adoption Credit, Educator Expense Deduction, option for those with itemized deductions to deduct state and local sales taxes paid in lieu of state and local income taxes paid and mortgage insurance premiums deduction.
- 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 over 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 of the amount on this year's return and the other half on your 2012 return. Details are available in IRS Publication 575.
With so much of your hard-earned money at stake and our complex tax law, it's no wonder a growing number of Americans use tax preparation solutions. "Trusted solutions like TaxACT navigate all the tax law changes for you to help maximize your refund, file a return that's 100 percent accurate and provide help when you need it," says Dolmage.
When choosing a tax preparation solution, especially free products, Dolmage warns you to carefully weigh your options. "TaxACT Free Federal Edition covers all 1040 returns, but other free programs are only for 1040EZ returns, sometimes referred to as 'simple returns'. The nearly nine out of 10 taxpayers who have more complex returns don't qualify for those."
For information about these and other tax law changes affecting this year's tax return, visit www.irs.gov and www.taxact.com/taxinfo. Learn more about TaxACT Free Federal Edition for both simple and complex returns at www.taxact.com.