IRS Plans Jan. 30 Tax Season Opening For 1040 Filers

 

 Here is a word from the Goodfellas at the IRS....

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 will not process paper tax returns before the anticipated Jan. 30 opening date. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit.

The IRS originally planned to open electronic filing this year on Jan. 22; more than 80 percent of taxpayers filed electronically last year.

Who Can File Starting Jan. 30?

The IRS anticipates that the vast majority of all taxpayers can file starting Jan. 30, regardless of whether they file electronically or on paper. The IRS will be able to accept tax returns affected by the late Alternative Minimum Tax (AMT) patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

Who Can’t File Until Later?

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.

As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure as smooth a tax season as possible under the circumstances.

Summary of The Fiscal Cliff Deal

The results are in.....

 

It was a soap opera but Congress did pass the American Taxpayer Relief Act of 2012 aka Fiscal Cliff Deal. The American Taxpayer Relief Act of 2012 was passed by the United States Congress on January 1, 2013, and was signed into law by President Barack Obama the next day. Highlights of the bill include:

• Permanent Alternative Minimum Tax (AMT) patch, adjusted for inflation. This will protect 30 million taxpayers from AMT liability.

 

• Preservation of the Bush-era tax cuts for individuals earning less than $400,000 (AGI) and families earning less than $450,000. Tax rates will increase from 36% to 36.5% for taxpayers above those income thresholds.

 

• Preservation of the $5 million individual ($10 million per couple) exemption for estate taxes. Estate value above that threshold will be taxed at 40% rate, up from the current 35%.

 

• Increase in the dividends and capital gains tax rate from 15% to 20% for individual taxpayers earning above $400,000 (AGI) and families earning above $450,000.

 

• An end to the payroll tax holiday. The social security withholding rate is reset to its previous 6.2% rate on the first $113,700 in earnings for each individual taxpayer.

 

• Extension of the $1,000 Child Tax Credit, the enhanced Earned Income Tax Credit, and the enhanced American Opportunity College tuition tax credit.

Now that the legislation has passed, the IRS can finalize forms and instructions and update its processing systems.  This is GREAT news for tax preparers! However, the IRS has not yet indicated if there will be delays in the start of electronic processing. Hey, I will take what I can get. I'm just glad that the drama is over...... at least for now.