How To File Old Tax Returns

Even in the dead of winter, we'll file your old taxes!

Even in the dead of winter, we’ll file your old taxes!

If you’ve missed the April 15th deadline but for whatever reason, you STILL need to file your tax return, you might be a little confused as to what to do.  Do you need to mail it?  Can you send it in via E-File?  Keep reading to find out your options.

Current Tax Year and Date Is BEFORE October 15th
If you missed the deadline but you are filing before October 15th, then you can still E-File your return.  The IRS shuts down the E-File system in October to get everything ready for the next filing season, so you only have until then to get your return transmitted.  Your options for doing this are to:

  1. Use IRS Free File or Fillable Forms. There are stipulations regarding these options which you can read more about here.
  2. Use Commercial Software.
  3. Find an Authorized E-File Provider. File Old Tax Returns is an authorized E-File Provider via Wilson Rogers & Company, Inc.  We can gladly help you in preparing, filing and transmitting your current year tax return.

Current OR Prior Tax Year and Date Is AFTER October 15th
Well, that means that you’ve missed the E-File window and your only option is to mail a paper copy of your return to the IRS.

The following are the steps you need to take to get your return prepared and ready for mailing:

  1. Gather your supporting documents. Look for your old tax documents, such as W-2s, 1099s, or 1098s. You will need these documents to file your return(s), as the IRS will expect you to report on your return what was reported to them via these forms.
  2. Request transcripts if necessary.  The most elusive documents for most clients are their wage and income forms.  The easiest way to obtain them is to contact your old company.  However, it’s never a sure bet that they’ll have the information on record, especially if it’s from several years ago.  Alternatively, you can always get copies directly from the IRS by requesting a “Wage and Income” transcript via the IRS Get Transcript Service.  If you can’t access the web service you can always use Form 4506-T, Request for Transcript of Tax Return
  3. Prepare your return(s). This is where the rubber meets the road.  The three steps that we outline under preparing your return before E-File shuts down apply here.  You can use the IRS fillable forms, find prior year software or hire a tax professional.  If you want to know how our process works, just download these instructions or give us a call at 844-TAXES88 (844-829-3788).
    • For filing back taxes, you should seriously consider hiring a tax professional. Since you are already late on filing, it would be in your best interest to file accurate returns the first time.  This way, you don’t have to worry about a bunch of back and forth with the IRS asking you to make corrections via dozens of letters to your house.
    • A tax professional can also help to ensure that all of the deductions and credits applicable to that year are applied to your return.  Remember, tax law changes each year and remember what was applicable in 2007 in 2015 might be a bit of a stretch.  But services such as ours always retain the applicable reference literature so that we can prepare an accurate return, not matter how many years late it is being filed.
  4. Mail In Your Return.  In this post we tell you the addresses where you can send your old tax return once you’ve finished preparing it. Note that you must send it to a different IRS Service Center depending on 1) if you are sending them money or not and 2) where you live.
  5. Address any balances owed.  This post from our sister site discusses how to deal with any outstanding balances.  Our basic recommendation is to 1) respond to any IRS or state correspondence, 2) assess what options are available to you and 3) enter into an appropriate resolution.  Once you’ve filed the returns and addressed the balances (if any) you are ready to move forward.  Just make sure that you remember to file your returns going forward or you’ll find yourself reading this post all over again!

Federal & State “Where’s My Refund” Pages

That was easy - for some!

That was easy – for some!

Many of our current year clients begin to get a little worried when their tax refund doesn’t come as quickly as they expect.  They often call us and ask us “Where’s my refund?”  To that question we usually reply that it can take anywhere between 7-21 days for one to receive their money.  If they have any concerns, they can continue to check the status of their refund’s processing via the IRS’ or states website.

Out in cyberspace, the various state tools are housed on each individual site.  This post aggregates them into one place for all to search.  So no matter if you filed in one, two or nine states, you now have a place where you can check them all via the links provided!

Locate your state below and click on its name to be taken to the applicable “Where’s My Refund” site.  If you need further assistance, the name of the appropriate taxing authority and their general phone number is listed.  We recommend that you have a copy of your return(s) handy when you visit the appropriate site as it will often want to verify things such as SSN, filing status, refund amount or Adjusted Gross Income (AGI).

Note that you will not find any links for the states of Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.  Why?  These nine states don’t have an income tax!

IRS “Where’s My Refund?” Use this link to check on the status of your Federal income tax refund.  If you need to speak to someone, feel free to call 1-800-829-1040.

Alabama Alabama Department of Revenue: 1-800-322-4106

Arizona Arizona Department of Revenue: 1-602-255-2060

Arkansas :  1-501-682-1100

California State of California Franchise Tax Board:  1-800-852-5711

Colorado Colorado Department of Revenue:  1-303-238-7378

Connecticut State of Connecticut Department of Revenue Services: 1-860-297-5962.

Delaware Delaware Department of Finance – Division of Revenue: 1-302-577-8200.

District of Columbia District of Columbia Office of Tax and Revenue: 1-202-727-4829

Georgia  Georgia Department of Revenue: 1-877-423-6711 option #2.

Hawaii Hawaii Department of Taxation: 1-800-222-3229.

Idaho Idaho Tax Commission:  1-888-228-5770

Illinois Illinois Department of Revenue:  1-800-732-8866

Indiana Indiana Department of Revenue:  1-317-232-2240

Iowa Iowa Department of Revenue: 1-515-281-4966.

Kansas Kansas Department of Revenue: 1-785-368-8222

Kentucky Kentucky Department of Revenue:  1-502-564-1600

Louisiana Louisiana Department of Revenue: 1-855-307-3893

Maine Main Revenue Services: 1-207-626-8475

Maryland Comptroller of Maryland Revenue: 1-410-260-7701 or 1-800-218-8160.

Massachusetts Massachusetts Department of Revenue:  1-617-887-6367

Michigan Michigan Department of Treasury:  1-517-373-3200

Minnesota Minnesota Department of Revenue:   1-651-296-4444

Mississippi Mississippi Department of Revenue:  1-601-923-7801

Missouri Missouri Department of Revenue:   1-573-526-8299

Montana Montana Department of Revenue:  1-866-859-2254

Nebraska Nebraska Department of Revenue:  1-402-471-5729

New Jersey New Jersey Division of Taxation: 1-609-826-4400

New Mexico New Mexico Taxation and Revenue Department:  1-505-827-0827.

New York  New York State Department of Taxation and Finance: 1-518-457-5149  

North Carolina North Carolina Department of Revenue: 1-877-252-3052 

North Dakota North Dakota Office of State Tax Commissioner: 1-701-328-1242.

Ohio Ohio Department of Taxation:  1-800-282-1784

Oklahoma Oklahoma Tax Commission: 1-405-521-3160

Oregon Oregon Department of Revenue: 1-503-378-4988

Pennsylvania Pennsylvania Department of Revenue: 1-717-787-8201  

Rhode Island State of Rhode Island Division of Taxation:  1-401-574-8829, option #3.

South Carolina South Carolina Department of Revenue: 1-803-898-5300

Vermont  Vermont Department of Taxes:  1-866-828-2865.

Virginia Virginia Department of Taxation: 1-804-367-2486

West Virginia Arizona Department of Revenue: 1-800-982-8297

Wisconsin Wisconsin Department of Revenue: 1-866-947-7363.

 

May 13th, 2015|Categories: Tax Questions|Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

2014 IRS Collection Statistics

IRS Stats

The U.S. Internal Revenue Service is the single largest collections agency in the world. We always find it kind of cool to analyze the collections data that is released every year. It always provides some insight into what is going on in the “delinquent” or “unfiled” tax return world. Since filing old tax returns is what this site is all about, here are some interesting tidbits from the most recent statistics available:

Budget & Personnel
In 2014 the IRS spent $11.6 billion and employed just over 84,000 to collect more than $3.1 trillion in tax revenue. Of those 84,000 personnel, over 18,000 are directly involved in enforced collections against taxpayers that owe back taxes.  In 2013 the IRS spent $11.6 billion to collect $2.8 trillion in tax revenue, using just under 87,000 employees, of which 19,000 were involved in enforced collections.

Delinquent Tax Return Inventory
In 2014 the IRS began with 11.7 million delinquent accounts (unfiled returns).  7.6 million new cases were added to inventory while only 6.9 million were closed.  This put the ending inventory at 12.4 million returns.  In 2013 the IRS saw 7.7 million new cases added to inventory but they were able to close 7.5 million.

Examinations
In 2013 there were 145.2 million individual tax returns filed, of which 1.2 million were selected for review (audit) in 2014.  Thus the effective audit rate was 0.9%.  Of those returns examined, the IRS proposed changes in 87% of them with an associated $11.8 billion increase in taxes owed.  For the returns that were reviewed in 2013, the audit rate was 1%, the IRS proposed changes in 89% of what it reviewed with an associated tax increase of $14 billion.

Enforcement
In 2014 the IRS filed 535 million Federal tax liens against taxpayers.  This was a 11% decline when compared to 2013.  Likewise, 432,000 seizures were conducted, which was down 21% from the prior year.  However, 1.9 billion levy notices were filed against taxpayers which was a 7.6% increase over 2013.

Offers In Compromise
In 2014 the IRS received 68,000 offers where taxpayers attempted to settle their tax debt for less than what was owed.  Of that number, the IRS accepted 27,000, which was a 12.9% decline from what the agency accepted in 2013.

What Does This All Mean?
The summary version of the above is that:

  • IRS budget cuts are forcing the agency to collect more tax revenue (current and delinquent) with a reduced staff
  • While the number of “new” unfiled returns added to inventory is increasing, the IRS isn’t able to close the gap on the case load
  • The IRS is examining fewer returns and enforced collections are down
  • All those commercials touting that you can settle your taxes for “pennies on the dollar” apparently don’t want you to read the IRS Consumer Alert about such statements.  They also don’t want you to know that the IRS only accepts less than approximately 45% of the offers it receives

We always tell our clients that while the IRS may be slow, they eventually do catch up with you.  If you are facing a tax problem, please know that “hoping” it will go away is not the answer.  The last thing you want is for the IRS to reach into your bank account on grocery day and take everything you’ve got in the account because you didn’t respond to the dozens of letters they sent you.  Didn’t get the letter?  The IRS doesn’t care because from their viewpoint, just because you  didn’t get it, didn’t mean we didn’t send it!

We’re always here to help you out.  So if you’d like to discuss your situation or want to file any of those “delinquent” returns you’re sitting on, feel free to give us a call at the number listed in the upper right or shoot us an email to the address listed in the footer of this page.

Understanding Your IRS Notice

When you receive an IRS notice, the first reaction is to panic and want to toss the envelope into the trash can!  We recommend that you don’t do that but instead, take a deep breath and keep the following in mind:

  1. An IRS notice typically will be about your federal tax return or tax account. It will be about a specific issue, such as changes to your account. It may ask you for more information. It could also explain that you owe tax and that you need to pay the amount that is due.
  1. Each notice has specific instructions, so read it carefully. It will tell you what you need to do.
  1. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.
  1. If you do not agree with the notice, it’s important for you to respond. You should write a letter to explain why you disagree. Include any information and documents you want the IRS to consider. Mail your reply with the bottom tear-off portion of the notice OR respond via fax if a number is provided.
  1. Always keep copies of any notices you receive with your other tax records.

There are dozens of IRS notices that one can receive; for a comprehensive list check out this link on the IRS’ website.  Listed below is a brief summary of some of the more common notices and a description of what they mean.

CP10:  The IRS made a change(s) to your return because they believe there’s a miscalculation. This change affected the estimated tax payment you wanted applied to your taxes for next year.

CP11:  The IRS made changes to your return because they  believe there’s a miscalculation. You owe money on your taxes as a result of these changes.

CP14:  This IRS sent you this notice because you owe money on unpaid taxes.

CP54G:  Your tax return shows a different name and/or ID number from the information the IRS has for your account.

CP2000:  The income and/or payment information the IRS has on file doesn’t match the information you reported on your tax return.  This could affect your tax return; it may cause an increase or decrease in your tax, or may not change it at all.

CP2005:  The IRS accepted the information you sent them. They’re not going to change your tax return and have closed their review of it.

CP2501:  You need to contact the IRS as they have received information not reported on your tax return.

Form 668Y:  Notice of Federal Tax Lien.

CP501:  You have a balance due (money you owe the IRS) on one of your tax accounts.

CP503:  Reminder notice that the IRS has heard from you and you still have an unpaid balance on one of your tax accounts.  Typically sent 30 days after the filing of a tax lien.

CP504:  Notice of intent to level.  If you do not pay the amount due immediately, the IRS will seize (levy) your property and apply it to pay the amount you owe.  Typically sent 30 days after the above notice.

LT1058:  Final Notice prior to levy.  If no response is received within 30 days, the IRS can levy you.  This is also your opportunity to request a hearing with regards to the matter.

Filing Taxes Without A W-2 or 1099

W2 1099

So you finally get around to filing that tax return that was due eons ago.  You know, the one with the job that you worked at 5 years ago.  The one where you think you were paying on your student loan.  But wasn’t there also that job where you worked as a “consultant” and they just paid you money and didn’t take taxes out?  Oh yeah, and then that one company that closed up shop a week after you bailed!  But wait, where are all those documents showing how much you earned?

It’s not uncommon when you are dealing with an “old” tax return for you to have “misplaced” some of those wage documents (e.g. Form W-2 or Form 1099-MISC).  If you need to obtain them so that you can file your tax return, here are some recommendations.

Contact The Employer
The best place to start with trying to obtain your W-2 is with your employer.  The copy they issue you will be the same as the one they provided to the IRS.  Furthermore, it will have the state details (i.e. amount of state tax withheld).  This is important when compared to getting your W-2 via the next option.

Request A Copy From The IRS
Every tax form that you receive from someone is typically also filed with the IRS.  W-2s are no exception to the rule.  Thus, if you can’t get a copy from your employer, the next best option is to request them from the IRS.  To do this, you want to request what is known as a Wage and Income Transcript.  You can do so online and get instant access or you can request that they be faxed to you by calling 1-800-829-1040 and asking for the above transcript.  The main downfall of an IRS transcript is that it will NOT have the state income tax withheld.  Thus, if you are trying to file your Federal and State Income Tax Returns, you’ll probably want to go  the first route.

Use Your Last Paystub and Form 4852
Sometimes you are trying to file your return for the current year OR the W-2 isn’t available via transcript just yet. In these instances file Form 4852, Substitute for Form W-2 Wage and Tax Statement, in place of the W-2. Use your last paystub to estimate your income and withholding taxes as accurately as possible.  Just be aware that the IRS may delay processing your return while it verifies your information.

If you need help in obtaining your W-2s or a transcript, feel free to give us a call or shoot us an email.  Also feel free to check out this page to see the many other ways we can assist you.

How To Pay Taxes Owed

If you find yourself in the undesirable predicament of owing the IRS, here are some things for you to keep in mind so that the situation doesn’t go from bad to worse:

Payment Methods & Tips

  • You can pay taxes electronically 24/7 on www.IRS.gov. Just click on the “Payments” tab near the top left of the home page for details.
  • Check out IRS Direct Pay to pay directly from your bank account. It’s secure and free and you’ll get instant confirmation that you have submitted your payment.
  • Pay in a single step by using your tax software when you e-file. If you use a tax preparer, ask them if they can make your payment electronically.
  • Whether you e-file your tax return or file on paper, you can choose to pay with a credit or debit card. One service that our clients often use is www.1040paytax.com.
  • If you enroll in the Electronic Federal Tax Payment System (EFTPS) you can pay your federal taxes electronically and directly to the government. You have a choice to pay using the Internet, or by phone using the EFTPS Voice Response System.
  • If you can’t pay electronically, you can still pay by a personal or cashier’s check or money order. Just make you check payable to the “U.S. Treasury” and be sure to write your name, address and daytime phone number on the front of your payment. Also, write the tax year, form number you are filing and your Social Security number. Use the SSN shown first if it’s a joint return.
  • If you pay by paper check, complete Form 1040-V, Payment Voucher. Mail it to the address listed in the instructions based on where you live.

Balance Owed On Prior Year Taxes

  • If you filed your return late, just know that the amount owed reflected on the return is incorrect. This is due to interest and penalties. Thus, once you file your return, the IRS will send you a notice indicating the correct amount to satisfy your liability.
  • If you have moved since you last filed a return with the IRS, make sure that you submit Form 8822 so that you can receive all future communications. The last thing you want is for the IRS to think you are ignoring you and then begin aggressive collection actions (e.g. liens, levies, wage garnishments, etc).

Inability To Pay Balance Off With One Payment

  • If you can’t pay off the balance with a single payment, it’s in your best interest to send in as much as you can to minimize the penalties and interest that will be assessed.
  • The IRS has many options for you to pay your balance off, including payment plans. This post on our sister site talks about setting up a guaranteed installment agreement and is well worth the read. 

Need assistance with your tax balance? Give us a call at 844-TAXES88 (844-829-3788) and we’d be happy to discuss you situation and tell you how we can be of service.

Can You E-File Old Tax Returns?

e-file_logoSo the April 15th deadline has come and gone, but for whatever reason, you STILL need to file your tax return.  What to do?  Do you need to mail it?  Can you send it in via E-File?  Keep reading to find out your options.

Current Tax Year and Date Is BEFORE October 15th
If you missed the deadline but you are filing before October 15th, then you can still E-File your return.  The IRS shuts down the E-File system in November/December to get everything ready for the next filing season, so you only have until then to get your return transmitted.

Current OR Prior Tax Year and Date Is AFTER October 15th
Well, that means that you’ve missed the E-File window and your only option is to mail a paper copy of your return to the IRS.  Check this post for addresses on where to mail it.

How To E-File Your Return
If you are still within the window of time where you can use E-File, here are your options:

  1. Use IRS Free File or Fillable Forms. There are stipulations regarding these options which you can read more about here.
  2. Use Commercial Software.  The thing to note with software is that it typically only supports the current year during the current E-File window.  Thus, if you need to E-File a previous year, take a look at the next option.
  3. Find an Authorized E-File Provider. File Old Tax Returns is an authorized E-File Provider via Wilson Rogers & Company, Inc.  We can gladly help you in preparing, filing and transmitting your current year tax return AND the two previous years (e.g. 2015-2013)!  Each one of the states is a little different so please consult with us.  Not dealing with the current or one of the two previous years?  We can still help.  To learn how, just download these instructions or give us a call at 844-TAXES88 (844-829-3788).

2013 Tax Law Highlights

High Income Household
If you are a high-income household making more than $400,000 (single) or $450,000 (married filing joint), your tax bracket will be up to 39.6% from 35%. However, this will not affect your 2012 income tax return. Those in the new high tax bracket will also be subject to a capital gains rate of 20% – up from 15% as well as the 3.8% surcharge from the Affordable Care Act.

Phase-out Thresholds
In the fiscal cliff legislation, the Pease itemized deduction phase-out is reinstated and the personal exemption phase-out will be reinstated. The thresholds are $300,000 for married filing joint, $275,000 for head of household, and $250,000 for single. This means that if you make that kind of money, you will not be allowed to take all of your itemized deductions. Your personal exemptions – another subtraction from your income before taxes are calculated – will be reduced.

Employees Net Pay
Employees’ net pay is also now 2% lower as the payroll tax holiday was allowed to expire. This means the full 6.2% of Social Security will now be withheld from your pay. The holiday lasted two years, and this increased percentage will help continue funding to the Social Security system. The wage ceiling on which Social Security is taxed has been increased to $113,700. Medicare tax is unlimited, but if you earn more than $200,000 an additional 0.9% will be withhold.

Congress patched the Alternative Minimum tax and adjusted it for inflation, which will keep taxes lower for the 60 million Americans that would have been affected.

Deductions

  1. Discharge of qualified principal residence exclusion. Filers going through a foreclosure or short sale who may have had loan forgiveness should look into this as it will exclude most, if not all, of the forgiven amount from taxable income.
  2. Educators may continue to deduct $250 in related job expenses as an adjustment to income.
  3. Mortgage insurance premiumsmay be deducted as mortgage interest
  4. The deduction for state and local sales taxes may still be taken
  5. The $1,000 Child Tax Credit, the enhanced Earned Income Tax Credit, and the enhanced American Opportunity Tax Credit will all be extended through 2017.
  6. Tuition costs may be deducted as an adjustment to income
  7. IRA-to-charity exclusion from taxable income remains including a special provision that allows transfers made in January 2013 to be treated as made in 2012.

Mileage Rates
Beginning on Jan. 1, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be 56.5 cents per mile for business miles driven, 24 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.

2012 Tax Law Highlights

Tax bracket limits have shifted higher for 2012 and A COLA of just over 3.8% for 2012 leaves federal tax brackets looking like the ones found in this post.

Personal & dependent exemptions are each worth $100 more.  In 2012, the value of each personal and dependent exemption has increased $100 to $3,800. 

Standard deductions are up across the board, increasing from $150 -$300.

  • Married filing jointly & qualifying widower $11,900 (up $300 from 2011)
  • Single filers & married filing separately $ 5,950 (up $150 from 2011)
  • Head of household $ 8,700 (up $200 from 2011)

There has been a $500 boost in the annual contributions on limit to 401(k)s and certain other qualified retirement plans.  With the $500 2012 COLA, participants in 401(k) plans, 403(b) plans, some 457 plans and the federal Government’s Thrift Savings Plan can contribute up to $17,000 to their accounts this year. The catch-up contribution limit for plan participants 50 and older remains at $5,500.

The phase-out range for Roth IRA contributions has increased.  The Adjusted Gross Income (AGI) phase-out ranges for 2012 are as follows:

  • Married filing jointly & qualifying widower $173,000-$183,000
  • Single filers & heads of household $110,000-$125,000

These phase-out ranges are up by $4,000 for married couples filing jointly and $3,000 for singles and Heads of household compared to 2011. Married individuals filing separate returns who are covered by a Retirement plan at work see no change here – the phase-out range for that category remains $0-$10,000.

The income phase-out range to claim deductions linked to traditional IRA contributions has increased.  This year, the AGI phase-out range looks like this:

  • Single filers & heads of household $58,000-$68,000
  • Married filing jointly with the taxpayer $92,000-$112,000 making the contribution covered by  workplace retirement plan
  • Married filing jointly with the taxpayer $173,000-$183,000 making the contribution not covered by workplace retirement plan, yet spouse is covered by one

Phase-outs kick in at slightly higher Modified Adjusted Gross Income levels for the Lifetime Learning Credit (LLC) and for the deduction for interest paid on student loans.

The phase-out trigger for the LLC has increased to reflect inflation: 

  • Married filing jointly & qualifying widower $104,000 (up $2,000 from 2011)
  • Single filers & heads of household $52,000 (up $1,000 from 2011)

The maximum above-the-line deduction for interest paid on student loans is $2,500 in 2012. This year, the phase-out range has been set $5,000 higher for joint filers only. For single filers, the phase-out range is unchanged.

  • Married filing jointly & qualifying widower $125,000-$155,000
  • Single filers & heads of household $60,000-$75,000

 Deductibles on Archer MSAs have increased. For 2012, the annual deductible amounts have the following limits:

                                                              Self-only coverage    Family coverage

Min.  annual deductible                                   $2,100                         $4,200
Max. annual deductible                                    $3,150                         $6,300
Max. annual out-of-pocket expenses             $4,200                         $7,650

Kiddie Tax.  The exemption for an under-age-19 child subject to the kiddie tax is currently $6,800, and the net unearned income not subject to the kiddie tax is still $1,900 in 2012.

The payroll tax holiday has been extended for the entire year.  In 2012, the employee portion of Social Security tax is set at 4.2% and self-employed Social Security tax is set at 10.4%. The Social Security taxable wage base increases to $110,100 for 2012.

Compensation limits pertaining to qualified retirement plans have risen.  In 2012, the maximum compensation used to determine contributions to qualified retirement plans is $250,000, up from $245,000 in 2011.

The highly compensated employee threshold is now $115,000 rather than $110,000. The maximum compensation defining a key employee in a top-heavy plan is $165,000 in 2012, up from $160,000 last year.

The maximum annual addition for a defined contribution plan is up $1,000 this year to $50,000. The maximum annual benefit for a defined benefit plan is up $5,000 for 2012 to $200,000.

Two standard mileage rates change this year.  In 2012, the standard mileage rate for business mileage remains at $0.555 per mile. The rate for medical and moving mileage decreases to $0.23 a mile. The rate for charitable mileage remains at $0.14 a mile.

The Section 179 business equipment deduction has plummeted.  In 2011, this deduction on was $500,000 with phase-outs starting at $2 million. This year, the deduction is but $139,000 with the phase-outs coming at $560,000.

IRS tax breaks for commuting have been adjusted this year.  The qualified parking deduction is $240 a month in 2012, up from $230 a month in 2011. The deduction for transit passes & carpooling/vanpooling is now limited to $125 per month. Last year, it was $230 per month.

The “nanny tax” exemption amount is now $1,800. That is an increase from $1,700 in 2011. If you pay a maid, au pair, or other domestic employee more than $1,800 this year, you are defined as an employer by the IRS. You are looking at the “nanny tax” and you should read IRS Publication 926 (the Household Employer’s Tax Guide) and consult your tax advisor.

If your nanny, maid or domestic employee was actually your spouse or your parent, a child of yours younger than 21, or a minor whose principal occupation is not domestic employment, you aren’t subject to such taxes even if you pay that person more than $1,800 for their services in 2012.

The lifetime gift tax exclusion has been raised to $5.12 million.  As the lifetime gift and estate tax exemptions are unified, COLAs that happen to one happen to the other. Hence the increase for 2012. 

The earnings limits for Social Security recipients younger than the full retirement age have risen slightly.

  • The earnings limit for workers younger than full retirement age (which is age 66 if you were born in the period from 1943-1954) is $14,640, a $480 increase from 2011. The Social Security  Administration  (SSA) will deduct $1 from your benefits for each $2 you earn past $14,640.
  • The earnings limit for workers turning 66 in 2012 will be $38,880, up $1,200 from last year. The SSA will deduct $1 from your benefits for each $3 earned over $38,880 until the month that you turn age 66.
  • There is no limit on earnings for workers who will be full retirement age or older for all of 2012.

As for being taxed on your Social Security benefits, you can figure out if you might be subject to such taxes by using the Social Security Benefits Worksheet in the instruction booklets for IRS Form 1040 and Form IRS Publication 915.

EITC exemption amounts have risen. In 2012, the federal earned income tax credit (EITC) for low- and moderate-income workers and working families maxes out at $5,891 (a $140 boost). The maximum income limit to qualify for the EITC is $50,270 for 2012, up from $49,078 in 2011. Joint filers with three or more qualifying children will get the maximum EITC.

Here are some notable things gone from the tax code in 2012 (who knows if these expired items will make a comeback): 

Charitable IRA gifts. Non-profits and colleges loved them, and they were useful to wealthy IRA owners over age 70½ with charitable inclinations – with a trustee-to-trustee transfer, the IRA owner could reduce his or her total income and possibly income tax with a gift of up to $100,000. Some members of Congress would like to make the charitable IRA rollover a permanent option. For 2012, it isn’t available.

Residential energy credit. The $500 lifetime credit allowed on 10% of the cost of qualified purchases of energy-efficient home improvement materials and services are now extinct.  

Educator expenses deduction. In 2011, a classroom educator could deduct up to $250 of the cost of school supplies used in class. No more. 

State sales tax deduction. It was nice to have the choice of whether to deduct state sales tax or state income tax; for 2012, the choice is gone (in states applicable).

2011 Tax Law Highlights

New Forms
In most cases, you must report your capital gains and losses on the new Form 8949, Sales and Other Dispositions of Capital Assets. Then, you report certain totals from that form on Schedule D (Form 1040). If you had foreign financial assets in 2011, you may have to file the new Form 8938, Statement of Foreign Financial Assets, with your return.

Standard mileage rates
The 2011 rates for mileage are different for January 1 through June 30 than for July 1 through December 31. For business use of your car, you can deduct 51 cents a mile for miles driven the first half of the year and 55 ½ cents for the second half. Medical and moving mileage are both 19 cents per mile for the early half of the year and 23 ½ cents in the latter half.

Standard deduction and exemptions increased

  • The standard deduction increased for some taxpayers who do not itemize deductions on IRS Schedule A (Form 1040). The amount depends on your filing status.
  • The amount you can deduct for each exemption has increased $50 to $3,700 for 2011.

Self-employed health insurance deduction
This deduction is no longer allowed on Schedule SE (Form 1040), but you can still take it on Form 1040, line 29.

Alternative minimum tax (AMT) exemption amount increased.

The Alternative Minimum Tax:
Exemption amount increased in 2011

  • $48,450 if single or head of Household
  • $74,450 if married filing jointly or a Surviving spouse
  • $37,225 if married filing separately Non-refundable personal credits allowed

Non-Business Energy Property Credit
Credit reduced to 10 percent of qualifying expenses Credit limited to $500 for all years after 2005 combined credit limit of $200 for windows for all tax years after 2005 Maximum credit for residential energy property limited to specific dollar amounts 

Health savings accounts (HSAs) and Archer MSAs
The additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses increased to 20 percent. In addition, for tax years beginning after December 31, 2010, the cost of an over-the-counter medicine or drug is not a qualified medical expense unless a prescription is obtained.

Roth IRAs
If you converted or rolled over an amount from a traditional IRA to a Roth IRA or designated Roth in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return. 

Alternative motor vehicle credit
You can claim the alternative motor vehicle credit for a 2011 purchase only if the vehicle is a new fuel cell motor vehicle.  

First-time homebuyer credit
The credit expired for most taxpayers for 2011. Some military personnel and members of the intelligence community can still claim the credit in 2011 for qualified purchases.

  • Repayment of First-Time Homebuyer Credit
  • Do not need to attach Form 5405 to return just to report repayment of 1/15 of 2008 credit
  • Attach Form 5405 only for year in which reporting disposition or change in use of main home for which credit claimed. 

Health coverage tax credit
Recent legislation changed the amount of this credit, which pays qualified health insurance premiums for eligible individuals and their families. Participants who received the 65 percent tax credit in any month from March to December 2011 may claim an additional 7.5 percent retroactive credit when they file their 2011 tax return. 

New Hire Retention Credit
Credit of up to $1,000 per employee available for qualified employees hired after Feb. 3, 2010, and before Jan. 1, 2011.  Employee must have worked 52 weeks, wages in second 26 weeks must have been at least 80% of wages in first 26 weeks.

Use Form 5884-B, New Hire Retention credit

Expired Provisions: 

  • Individuals making work pay credit
  • Exclusion from income of benefits provided to volunteer firefighters and emergency medical responders
  • Computer technology and equipment allowed as qualified higher education expenses for qualified tuition programs
  • Exemption from AMT treatment for certain tax-exempt bonds
  • Advance earned income credit 

Mailing a return

The IRS changed the filing location for several areas. If you’re mailing a paper return, see the Form 1040 instructions for the correct address.