8 predictions for the 2012 tax season
Expect fewer delays but just as much bureaucracy, as new forms and requirements go into effect. AMT patches are likely to expire but may return.
This post is by Claudia Hill at Forbes.com.
As the end of 2011 draws near, individuals and tax professionals are planning for the annual tax-return preparation ritual. Here's my view of what to expect:
- The absence of excessive congressional tinkering with the tax code provides a smoother start to filing season; taxpayers will receive their refunds earlier. That’s the good news. In filing season 2011, the Internal Revenue Service was not able to accept most categories of returns until Valentine's Day.
- Individual extenders and the alternative-minimum-tax patch from 2010 will expire virtually unnoticed at the end of 2011. This virtually guarantees congressional action in 2012 to prevent millions of taxpayers from an AMT hit next year and creates uncertainty in 2012 planning until it is addressed. The popular deduction for state and local sales taxes as well as tax-free treatment of distributions from IRAs for charitable purposes are among several perennial extenders that also expire at the end of 2011.
- Permitted delays for and filing confusion about documents will continue to frustrate preparers and individual filers who want to comply with the law.
- New 1099-B basis reporting rules may create more problems than they solve. Schedule D is the most changed in format for 2011 -- be sure to read the instructions before you begin. New Form 8949, Sales and Dispositions of Capital Assets, must be completed before you begin Schedule D, and you may be required to complete up to six versions of Form 8949, depending on the categories and holding periods of assets sold. I’m giving this form the No. 1 trouble-spot award for 2012. (Post continues below video.)
- IRS form creators were not content to challenge us with the new Schedule D; they intentionally added lines to Schedule C and Schedule E that caused us to recoil and then told us to leave them blank for 2011 returns. Because those businesses that offer their customers the ability to use credit cards or other online payment methods will have a third-party report (Form 1099-K) issued to the IRS this year, the schedules call out a separate line to enter the reported income from "Merchant Cards and Third Party Payments." Then, with a "Got your attention?" flare, IRS indicates: "For 2011, enter -0-.”
- Small businesses take note: the 100% bonus depreciation deduction available to year end will be scaled back to 50% in 2012, and the Section 179 "election to expense" deduction limit will fall from $500,000 this year to an inflation-adjusted $139,000 in 2012. Be sure your tax professional takes time to explain the differences in these two benefits.
- Authorizing a representative wil become a little more time-consuming: Taxpayers who file joint returns needing assistance in dealing with IRS matters will no longer be allowed to sign a single joint return authorization. Each individual must separately prepare and authorization representation. New Form 2848, Power of Attorney, allows for only one Taxpayer Identification Number and client signature. In past versions, the form allowed for both spouses’ Social Security Numbers for joint filers and for business Employer Identification Numbers in separate fields. Further, the form now recognizes and requires the IRS-mandated PTIN assigned those who prepare returns or claims for refunds. While the IRS has not indicated when it will stop accepting the prior version of the form, one has to hope the agency gives adequate notice, since it is currently running three to four weeks behind in posting the information to its internal CAF system of tracking authorizations.
- For those cosmopolitan taxpayers who have recently become aware of their responsibility to notify the U.S. Treasury annually of their foreign bank accounts, the IRS has something new. IRS Form 8938, Statement of Specified Foreign Financial Assets, may be required for 2011 if you meet thresholds as low as $50,000. Since the penalties for not filing this multipage, confusing, duplicative-of-other-mandated-forms document with your personal return can be onerous, be sure to ask your tax professional if you are subject to this reporting.
Wishing happy holidays and a peaceful new year to taxpayers and tax professionals alike. Tax filing season will be with us soon.
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