By Susan Whitney
In Margaret Mitchell's epic novel, Gone With The Wind, she writes, “Death, taxes, and childbirth, there's no convenient time for any of them.” Ain't that the truth! Nevertheless, here it is tax season once again. Ever since income tax was first conceived and levied during Abraham Lincoln's presidency in order to pay for the Civil War, the tax code has been changing and expanding. This year is no different.
By now you should have received all W2's and 1099's. By law these documents are to be mailed no later than January 31, 2012 for W2's and February 1, 2012 for 1099's.
Many online services such as Turbo Tax and TaxACT will aid you in preparing your return, or you can purchase current tax preparation software to complete the dreaded yearly task.
Whether you complete your own tax return or are assisted by professional tax preparers such as an accounting firm like H&R Block or an independent Certified Public Accountant or other qualified tax preparer, the following are some of the changes (and reminders) you'll want to consider when filing your 2011 return.
The due date for filing returns or a request for extension is set this year for April 17, 2012, because the traditional filing date of April 15th is a Sunday, and April 16th is the Emancipation Day holiday in the District of Columbia. Please note that the address for sending returns has changed. Returns that include a tax payment should be sent to:
For 1040 forms send the return and tax payment to: Internal Revenue Service, Box 97001, St. Louis, MO 63197-0011
And 1040A and 1040EZ returns that involve a refund should be sent to: Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999-0015
Your return can also be electronically filed on the Internal Revenue Service (IRS) website, www.irs.gov. All forms for filing your 2011 tax return are available to download at that website. Forms can also be obtained at the Johnson County Library.
For those taxpayers who itemize deductions on Schedule A, be sure to save all documentation and receipts you believe to be deductible. You'll be hearing this advice more than once in this report.
For those taxpayers not itemizing deductions on Schedule A, the Standard Deduction has been increased to $5,800 for single or married filing separately; and to $11,600 for married taxpayers filing jointly, and for single head of household the deduction is $8,500. Naturally, there is an exception to this rule. For those born before January 2, 1947 and those who are blind, the standard deduction is calculated differently and you should check with your tax preparer or go to www.irs.gov/pub17 for those details.
Exemptions have increased by $50, and the new figure is $3,700.00 per dependent.
Earned Income Tax Credit has been increased and several factors are involved when calculating the credit. The Earned Income Credit varies by individual and number of children in the home (up to three), but is first based on the actual amount of earned income. Unemployment benefits received during the tax year are not considered when calculating this credit. You can read more about these requirements in IRS Pamphlet 17 obtained online at www.irs.gov or by consulting your tax preparer.
Making Work Pay Credit that was available last year is no longer available for 2011 tax year.
Medical Deduction remains the same as last year. Any amount over and above the first 7.5 percent of taxpayers Adjusted Gross Income is deductible.
Since Johnson County was declared a disaster area after the April 19, 2011 tornados, a taxpayer may deduct a portion of out of pocket expenses for damages not fully covered by insurance. The deduction is limited to out-of-pocket expenses that are over and above a figure equal to 10 percent plus $100 of the taxpayers Adjusted Gross Income.
For taxpayers who itemize their deductions, mortgage interest and property taxes are still deductible, so be sure to have that documentation available.
Keep receipts and cancelled checks for evidence as to any charitable donations.
If you itemize deductions, you are allowed a maximum $500 Residential Energy Credit for installing certain energy efficient products to your home, such as doors, windows, new roofs, water heating systems and insulation. However, if in a previous tax year you claimed and received a Residential Energy Credit of $500 or more for any allowed improvement, you will not be entitled to the Residential Energy Credit for 2011. Consult a tax preparer or visit www.irs.gov for detailed information on this tax credit.
For the self-employed, it is important to document all income and expenses related to your business including travel expenses, meals, hotels, etc. The mileage allowance has been increased as follows: From 1/1/11 to 6/30/11, the rate is 51 cents per mile, and from 7/1/11 through 12/31/11, the rate is 56 cents per mile. It is important to save all receipts for business related expenses. Again, consult with a tax expert or visit the IRS website for detailed information on qualified business deductions.
According to Celeste Simcox Dunn of H&R Block in Mountain City, the IRS has notified H&R Block that there is already a backlog on processing tax returns. The taxpayer who is to receive a refund can expect to wait for a period of time past their projected refund date. You should keep checking online at www.irs.gov/whereismyrefund but please understand that the projected dates are not etched in stone. “The IRS requests that you do not call them but keep checking online and try to be patient,” Dunn said. “It takes approximately three weeks from time of filing to receipt of refund depending on the complexity of the tax return.”
Dunn added that taxpayers should keep a copy of their tax return along with corroborating documentation for a period of at least seven years; that way you will be prepared in the event of an IRS audit. Audits are random and frequently involve simple errors on the 1040 form, so if you find yourself being audit don't panic, but keep all your documentation.
It might be interesting to note that Al Capone, the nations most notorious gangster of the 1920's and 1930's, would have definitely benefited from the above advice. He was indicted in 1931 for Federal Tax Evasion and sentenced to 11 years in prison. He entered a Federal penitentiary in Atlanta in 1932 and was subsequently transferred to Alcatraz. You can be sure this won't happen to you if you save all your income and expense documents and file your tax return or extension request no later than April 17, 2012.
Start collecting receipts and documents now in anticipation of your 2012 return because more changes are in store.
By Susan Whitney