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IRS to Start Processing Delayed Returns on February 14, 2011

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On January 20, 2011, the IRS announced that it plans to start process tax returns, which were delayed as a result of the last month’s tax law changes, on February 14, 2011. It should be remembered that the taxpayers can begin preparing their tax returns immediately because many software providers are ready now to accept these returns.

Beginning February 14, 2011, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction.

Taxpayers using commercial software can check with their providers for specific instructions. Those who use a paid tax preparer should check with their preparer, who also may be holding returns until the updates are complete.

Most other returns, including those claiming the Earned Income Tax Credit (EITC), education tax credits, child tax credit and other popular tax breaks, can be filed as normal, immediately.

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If you have any questions with respect to your 2010 tax return, call Sherayzen Law Office to discuss your tax case with an experienced Minneapolis tax lawyer.

Tax Attorney St Paul | Who Must Wait to File 2010 Tax Return

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While for most taxpayers, the 2011 tax filing season starts on schedule. Due to tax law changes enacted by Congress in December, however, some taxpayers need to wait until mid – to late February of 2011 to file their 2010 tax returns in order to give the IRS time to reprogram its processing systems. This is mostly due to the renewal of the three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 on December 17, 2010.

The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the recent tax law changes. Meanwhile, the affected taxpayers should not submit their returns until IRS systems are ready to process the new tax law changes; however, the affected taxpayers can start working on their tax returns. For taxpayers who must wait before filing, the delay affects both paper filers and electronic filers.

The most common types of taxpayers who may need to wait to file their tax returns include:

1. Taxpayers Claiming Itemized Deductions on Schedule A

Due to the tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes.

2. Taxpayers Claiming the Higher Education Tuition and Fees Deduction

This is primarily concerns those taxpayers who claim their deduction on Form 8917. The deduction, which covers up to $4,000 of tuition and fees paid to a post-secondary institution, can be claimed by parents and students.

Note, however, that this delay does not concern those taxpayers who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.

3. Taxpayers Claiming the Educator Expense Deduction

This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

Sherayzen Law Office can help you deal with and take advantage of the recent tax law changes. Call or e-mail Sherayzen Law Office to discuss your case with an experienced St Paul tax attorney!

Importance of Determining Your Tax Filing Status

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Figuring out your filing status is the first major step in filing your tax return. Your tax filing status not only will allow you to determine the correct tax (from the Tax Computation Worksheet or appropriate column in the Tax Table), but also it is crucial to understanding your eligibility for and the exact amount of deductions, exemptions, tax credits. For example, in some situations, if your taxable income is close to $160,000, the choice between filing as “single” and filing as “married filing separately” may influence whether you need to pay the alternative minimum tax (“AMT”); it is more likely that filing as “single” will help you avoid AMT, while “married filing separately” status may have the opposite effect. Sometimes, the latter tax filing status may also make you ineligible for certain tax credits even at a much lower income bracket – a situation that may be avoided if you are filing joint tax return with your spouse.

There are five possible tax statuses: 1) single; 2) married filing jointly; 3) married filing separately; 4) head of household, and 5) qualifying widow(er) with dependent child. The benefits and drawbacks of each status differ greatly depending on a tax situation. In some cases, you may be eligible for more than one status (for example, single and head of household); in other cases, your eligibility may be greatly influenced by the choices you make.

In order to draw out the benefits and avoid costly mistakes, careful tax planning is necessary. The Internal Revenue Code (“IRC”) is so complex that it requires a tax professional to fully understand its provisions. Tax attorneys are professionals who usually are in a much better position to legitimately utilize possibilities offered by the IRC.

Sherayzen Law Office is a law firm that offers individual and business tax services. We can help you understand your current tax position, file the tax returns for you, and carefully plan your tax strategies for the future. CALL NOW to start resolving your tax issues!

Sales Tax Deduction for Vehicle Purchases

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If you are considering whether to buy a new car, it is important to remember that, under the American Recovery and Reinvestment Act of 2009 (the “ARRA”), taxpayers may deduct state and local sales and excise taxes paid on the purchase of new passenger cars, light trucks, motor homes and motorcycles. The deduction is available on new vehicles purchased from February 17, 2009 through December 31, 2009. In states that don’t have a sales tax, the ARRA provides a deduction for other taxes or fees paid as long as these taxes and fees are assessed on the purchase of the vehicle and are based on the vehicle’s sales price or as a per unit fee. This deduction is available whether or not a taxpayer itemizes deductions on Schedule A.

The deduction is limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.

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