Many of you may have noticed the headlines announcing possible delays for tax filing. These delays are meant to allow the IRS time to catch up with the tax legislation passed late in the year by Congress and signed into law by President Obama on December 17, 2010 (i.e. Bush tax cuts extension bill).
Some of the headlines I’ve seen have implied that things over at the IRS are out of control and will cause all kinds of problems across our tax filing system. As I have dug into the issue, I’ve realized that everything is going to be okay, and there should not be any major headaches.
To summarize, those who make certain deductions may not be able to submit their returns until some time in February. That date is yet to be announced. Additionally, this year, the normal tax date (April 15th) has been extended to April 18, 2011 because of a holiday. Here are the details.
When Can I File My Return?
If you are one of the estimated 50 million taxpayers who must delay filing, the delays will only push you back until mid- to late February. This will not be much of a change for most of us.
The original headlines almost made it sound as if millions of us would be required to file for a tax extension past April. Fortunately, it does not appear that this will be the case. However, the IRS has not yet announced the exact day when such returns will be accepted.
How Do I Know If I Need To Delay Filing My Return?
The 60% of taxpayers who claim the standard deduction will not be affected by the delay. You will need to delay filing only if the following situations affect your return.
1. Taxpayers claiming itemized deductions on Schedule A
Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses, and state and local taxes. For some taxpayers, itemized deductions may include allowance for state and local sales tax paid throughout the year.
2. Taxpayers claiming itemized deductions on higher education tuition and fees
This deduction can cover up to $4,000 of post-secondary expenses and is filed using Form 8917. There will be no delays for parents and students who plan to claim credits such as the American Opportunity Tax Credit or, an often overlooked deduction, the Lifetime Learning Credit.
3. Taxpayers claiming the education expense deduction
This deduction is mainly for teachers who might spend money out-of-pocket for their classrooms. Educators are allowed to deduct up to $250 worth of such expenses and can claim the deduction on forms 1040 or 1040A.
If you are affected by the above deductions, and if you plan to file during the month of January, you will not be able to use the IRS paper and electronic filing systems. However, TurboTax has announced that their software is up to date. Taxpayers can enter all of their tax information into the TurboTax software and file the forms. TurboTax will securely hold the documents until the IRS begins accepting returns that have been affected by the changes in legislation.
Also check some of the other free online tax preparation software and services – most should take into account the new filing delays and deadline.
Delayed Deadline For All Taxpayers
In addition to the “deduction delay,” the ubiquitous April 15th deadline has been pushed back this year due to a little known Washington DC holiday. This year, Emancipation Day falls on Friday, April 15th. Federal law prevents the IRS from setting a tax deadline on a holiday, or a non-weekday. This means that returns cannot come due on Saturday or Sunday, either. Therefore, midnight on Monday, April 18th is your IRS deadline for 2011.
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