Tax Season Delayed until January 30 due to Late Passage of Fiscal Cliff Legislation
By Rafique S. M. Ahmed

  

The Internal Revenue Service has pushed the start of the 2013 tax filing season from the initially delayed start date of January 22 to another delay until January 30. The delay has been caused by the late passage of the American Taxpayer Relief Act of 2012, also known as the fiscal cliff legislation, passed by Congress on New Year's Day and signed into law by President Obama.

The last minute passage of the fiscal cliff legislation did save 98% Americans from a steep increase in their taxes effective January 1, 2013; however, ironically at the same time, it has created a gigantic nightmare for the IRS which is working nonstop and is fully committed to begin accepting tax returns as scheduled. IRS anticipates approximately 120 million taxpayers would be able to start filing their tax returns starting January 30. However, there are thirty more IRS forms which require more time for extensive programming, updating and testing of the IRS systems. Some of the key forms requiring more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). The IRS anticipates taxpayers affected by these forms should be able to file their tax returns in late February or may go into March 2013. As a result, refund checks will be delayed until at least February for almost everyone during this tax season.

  

 

 

"We have worked hard to open tax season as soon as possible," IRS Acting Commissioner Steven T. Miller said. "This date, January 30 ensures we have the time we need to update and test our processing systems." IRS would not process paper tax returns filed before January 30 therefore, there is no benefit to attempt to paper file tax returns before the opening date."The best option for taxpayers is to file electronically starting January 30," Steven Miller said.

 The following are the significant changes that may affect your 2012 tax returns:

  • The Alternative Minimum Tax (AMT) patch was permanently extended adjusting the income exemption levels for inflation and also saving 34million middle income families from payment of an average of $3,700of the so-called wealth tax for 2012. AMT exemption amount was also decreased.
  • The Educator Expense Deduction was re-instated allowing teachers to claim up to $250 of classroom expenses for supplies, materials, books and software.
  • Energy Tax Credit for qualified energy-efficient home improvements was extended through the fiscal cliff and remains at $500.
  • Foreign earned income exclusion has increased to $95,100.
  • The annual wage limit for Social Security (FICA) tax for 2012 is $110,100.
  • The maximum adoption credit or exclusion for employer-provided adoption benefits has decreased to $12,650. The modified adjusted gross income (MAGI) must be less than $229,710 in order to claim either the credit or exclusion.
  • Adoption credit is no longer refundable to taxpayers.
  • Increased dependent care credits remain in place allowing taxpayers to claim up to $2,100 of the eligible dependent care cost for two or more dependents.
  • In order to exclude education savings bond interest, the modified adjusted gross income must be less than $87,850 ($139,250 if married filing jointly or qualifying widow(er)).
  • Personal exemption amount increased to $3,800.
  • Taxpayers could claim Lifetime learning credit if their MAGI is less than $52,000 ($104,000 if married filing jointly).
  • Standard mileage rate for business use of vehicle is increased to 55.5 cents per mile. The rate for use of vehicle to get medical care or move is increased to 23 cents per mile. The rate remains unchanged at 14 cents per mile for driving for charitable causes.
  • Retirement savings contribution credit is available to taxpayers with modified adjusted gross income of less than $28,750 ($57,500 if married filing jointly; $43,125 if head of household).
  • College students can deduct education expenses related to tuition, books and other supplies up to $4,000.
  • Taxpayers continue to qualify for child tax credit of $1,000 for each dependent child under the age of 17.
  • You can still receive a substantial amount of Earned Income Tax Credit  if
  • Three or more children lived with you and you earned less than $45,060 ($50,270 if married filing jointly)
  • Two children lived with you and you earned less than $41,592 ($47,162 if married filing jointly)
  • One child lived with you and you earned less than $36,920 ($42,130 if married filing jointly)
  • A child did not live with you and you earned less than $13,980 ($19,190 if married filing jointly) 
  • The maximum Adjusted Gross Income for Earned Income Tax Credit has also increased. 
  • The maximum investment income taxpayers can have and also get the Earned Income Credit has increased to $3,200.

1414. (Rafique S. M. Ahmed  is a professional Tax Accountant and has been providing accounting and tax services in California for more than thirty-five years. He is also an Authorized IRS Electronic Filing Provider, located at 1109 Via Verde, San Dimas, California 91773 and can be reached at (909)599-1412 or 599-1414)

 

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Editor: Akhtar M. Faruqui
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