Political gridlock placed the country's tax code in a deep freeze in 2010, and, as a consequence, there are few changes that filers need worry about this tax season.
"There's not a lot that's new this year,". "It's a little unusual. I think the political winds were such that [Congress] really didn't want to do a lot of things."
While the tax code hasn't changed much, some things are different.
The standard deduction for tax filers who do not itemize has increased, as have the personal exemption amounts a filer can claim. Limits on the Alternative Minimum Tax have risen, as have the standard mileage rates business people can claim.
But what may concern tax filers more are issues relating to time -- specifically the filing deadline, and the wait to receive one's tax refund.
Last year the tax filing deadline was delayed three days. This year the deadline has been delayed two days, to Tuesday, April 17, because April 15 is a Sunday and April 16 is the Emancipation Day holiday in the District of Columbia.
With regard to refunds, some taxpayers who filed electronic income tax returns this year can expect a delay of a week and possibly two in some cases, because the Internal Revenue Service added a new security component to its computer system in a stepped-up effort to detect refund fraud.
"The government has had a tremendous increase in the number of identity-theft matters that its dealing with." Last month the Justice Department apprehended 105 people in 23 states in a nationwide crackdown on identity theft and tax refund fraud that was timed to send a message to tax cheats as the season begins, according to the Internal Revenue Service. The sweep ranged from Alaska to Florida and included 80 complaints and indictments and 58 arrests.
The problem stems from stolen Social Security numbers that are made public after a person dies.
He personally encountered the problem when he tried to file his income taxes last year -- a year after his wife died.
"Somebody had stolen her ID right before she died and when I tried to file a joint return, it wouldn't let me electronically file my return. I got flagged by the system,".
The arrests for identity theft and tax fraud are just part of an apparent IRS crackdown on fraud and compliance this tax season.
The tax agency has placed a higher emphasis on detecting fraud in two other areas: the popular Earned Income Tax Credit and the reporting of foreign financial assets, which most commonly are accounts in non-U.S. banks.
Tax preparers now must fill out a five-page document, known as form 8867, declaring the filer eligible for the Earned Income Tax Credit, which is a refundable tax credit for low to moderate-income working people.
Those not using form 8867 can be fined $100 to $500 if the tax filer is found to be ineligible for the tax credit.
Last year, about 40,750 Lucas County taxpayers got the credit and pocketed about $2,260 per recipient. But the government has declared the Earned Income Tax Credit to be an area of tax fraud, and so it is cracking down.
"The fraud is there," . "I like to see people get it who deserve it, but I don't want to see anyone take advantage of me for that."
"It's probably one of the most common fraudulent areas on a tax return. Some tax preparers don't pay much attention to it and just claim it,". "Some make up numbers for it and just give it to a client. But now at $500 per incident, that's pretty steep."
Offshore assets
For reporting foreign assets, the IRS has created a new form, 8938, designed to improve compliance by taxpayers with offshore financial assets whose totals exceed certain thresholds.
A bank account in Canada, for example, would count as offshore.
What makes the issue worth noting is it carries new, stiff penalties for those who fail to report those assets.
Those who don't file by April 17 are subject to a $10,000 penalty, and added $10,000 penalties up to $50,000 for each 30-day period a person fails to file 90 days after the IRS has notified them that they must file.
In December, IRS commissioner Doug Shulman said in a speech at an international tax forum in Washington that the tax agency was "turning up the pressure on those not paying taxes on overseas assets."
The IRS last year began "data mining" information retrieved from offshore programs, including names and account numbers from a prominent Swiss bank.
"I know a lot people who have put money offshore. Some would just go to Canada and start a savings account …," he said. "Some people have Swiss bank accounts because they're just trying to diversify their accounts. Other people put money offshore because they feared the economy would collapse and they wanted to protect themselves.
"They didn't do anything illegal. They were doing asset protection," . "But you've got to declare it."
Basic issues
Most taxpayers will care more about basic issues, although there are not a lot of changes.
For those who take the standard deduction, the limits have risen by $100 to $5,800 for single taxpayers or married taxpayers filling separately, and $11,600 for married couples filing jointly. The deduction for a head of a household is $8,500, also up by $100. Personal and dependent exemptions have risen by $50 to $3,700. Most taxpayers can take personal exemptions for themselves and an additional exemption for each eligible dependent.
Congress passed another "patch" to extend the Alternative Minimum Tax and raise its limits for the 2011 tax year. The new exemption limits on the ATM, created to counter people who have multiple tax deductions and insure that everyone pays some taxes, are $48,450 (up from $47,450) for singles and $74,450 (up from $72,450) for married couples filing jointly. It is $37,225 (up from $36,225) for a married person filing separately.
A taxpayer usually is subject to the AMT if taxable income, plus any adjustments that apply, totals more than the AMT exemption amount.
The 2011 optional standard mileage rates, which are used to calculate deductible costs of operating a vehicle for business, charitable, medical or moving purposes, went up twice in 2011. The rate was 51 cents per mile for business miles from Jan. 1 through June 30, but rose to 55.5 cents for miles driven after June 30. In 2010 the rate was 50 cents a mile. The rate for medical or moving purposes was 19 cents per mile in 2011 -- up from 16.5 cents -- while the rate for driving in service of charities stayed at 14 cents a mile.
The First Time Home buyer credit has expired for the general population but it still exists for members of the armed forces or U.S. foreign services who contracted to buy a home before May 1, 2011, and who closed on the sale before July 1, 2011. Those members of the armed or foreign services who either are buying their first home, or who are long-time homeowners buying a replacement principal residence, can claim a home buyer credit of up to $6,500 (up to $3,250 for a married individual filing separately).
Lastly, the IRS created new form 8949 to change the way capital gains and losses are reported by tax filers.
Brokers are now required to report the cost basis for stocks sold by their clients and bought in 2011. The reporting changes extended to include mutual funds and exchange-traded funds on Jan. 1 of this year. Before 2011, brokers only had to report the proceeds from stock sales.
The new reporting and form 8949 are both designed to stem falling tax revenues that have been dropping because of investors who underestimate their capital gains on their tax returns. The IRS will compare what the broker reports against what the tax filer claims.
No comments:
Post a Comment