A week or so ago we announced that the so called fiscal cliff had been averted, at least to some degree, and that the current tax rates were being extended for a majority of taxpayers. Only those who earn more than $400,000-450,000 saw their tax rates rise.
Even with the changes enacted by the American Taxpayer Relief Act (ATRA) on January 2nd, however, most taxpayers will be paying more this year due to the expiration of the temporary payroll tax cut. The expiration of that cut means that we'll all be paying 2% more, which for a family making $50,000 a year means an added $1000 in taxes in 2013.
With all the changes being made due to the ATRA legislation, the IRS is now scrambling to make updates in their system so that filing can begin. Today they announced when they will start accepting returns for 1040 filers.
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IRS Starts Accepting Returns January 3oth
So with the passage of American Taxpayer Relief Act there are quite a few provisions of that bill that will affect 2012 taxes (while a majority affect 2013 and moving forward). Because some of the provisions affected 2012 taxes the IRS is now scrambling to make updates to their systems in order to start processing returns January 30th.
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.
The IRS originally planned to open electronic filing this year on Jan. 22; more than 80 percent of taxpayers filed electronically last year.
Among the changes that affected 2012 that require system updates:
- Under ATRA, a permanent patch has been made to the alternative minimum tax (“AMT”) rules, which is retroactive back to January 1, 2012. The AMT exemption amount for 2012 is set at $50,600 for single taxpayers and $78,750 for married taxpayers filing jointly.
- ATRA retroactively restored the deduction for state and local sales taxes for the 2012 tax year and extends it through December 31, 2013.
Who Can't File Taxes On January 30th?
There are some taxpayers that won't be able to file and have their returns accepted on January 30th. Those filers may have to wait until late February or early March. The IRS details who they are on their site.
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.
A majority of taxpayers will be able to file and have their returns accepted on January 30th.
Remember To Still Pay Estimated Taxes January 15th
One thing a lot of those of us who are self employed or who have enough side income need to remember is that we still have a 2012 estimated tax payment coming due on January 15th. Payments for estimated taxes are due on the following dates typically:
- April 15
- June 15
- September 15
- January 15
So while the IRS isn't accepting returns until January 30th, you are still required to make that payment before then if your income requires it.
Get Your Information Organized
So while the IRS isn't actually accepting returns until January 30th, that doesn't mean you can't start compiling all of your tax information that you'll need when you do file.
So what information can you get together in preparation for filing?
- Tax returns for the last two years
- Birth dates and occupation(s)
- Change of address (if you moved)
- Bank name, routing and account numbers (for refunds or payments)
- Spouse name and social security number
- Dependents names and social security numbers
- W2s and 1099s for all income and compensation
- 1099 Interest, 1099 dividends, 1099 Misc, 1099C cancellation of debt, 1099G unemployment compensation, 1099R distribution from IRA, 401k, etc.
- Last year’s state tax refund
- health care costs if they were greater than 7.5% of AGI
- State and local income tax, car sales tax
- Charitable contributions
- Theft and casualty losses
- Home office deductions
- IRA or contributions to pension plans
- Student loan interest
- Moving expenses
- Student tuition fees
- Estimated federal and state tax payments
- Credit for child and dependent care info
- Education credit info
- Child tax credit/adoption credit info
Start Your Return Now
While the returns aren't going to be processed until January 30th, a lot of the tax filing companies like TurboTax have already made the changes to their systems and are already accepting returns. They'll just hold onto your returns until the filing date, and then send them on through.
The federal tax refund is the most important financial moment of the year for many families. We know how much people depend on their tax refunds to pay bills and living expenses,” said Bob Meighan, CPA and vice president of TurboTax. “The most important thing people can do is file now so they’re first in line for their tax refund.
I love how private for-profit companies are able to get their systems updated within a few days, but the slow moving federal government has to take weeks to get their ducks in a row.
I've been using TurboTax for 4-5 years now, and they're my preferred tax filing software (see others I recommend below this post). I'll be filing my return later this week after I make my last estimated tax payment for 2012 on the 15th.
Stay tuned for a full TurboTax review where I ‘ll do a walk-through of the product, and also be giving away several copies to lucky readers to get free federal and state tax filing! Start your return now, and wait to complete it until you see if you won!