What tax changes are new for filing your tax return?

What tax changes are new this year?By Jeffrey Brooks, CPA, CFP, MBA for Jbrooks Wealth Advisors, PC, a Professional CPA and CFP Firm  jeff@jbrookswa.com  602-292-2009  Please consult with your professional tax CPA regarding your specific circumstances!

 

 

IRS has released on its website a number of the final tax forms and instructions for the 2012 tax year, including Form 1040, along with its related schedules. They reflect many administrative and law changes that apply for the 2012 tax year.

Form 1040—U.S. Individual Income Tax Return

Tax benefits extended. Several temporary tax benefits have been extended through 2013, including the following:

  • Deduction for educator expenses in figuring adjusted gross income (line 23).
  • Tuition and fees deduction (line 34).
  • Credit for nonbusiness energy property (line 52).
  • Election to deduct state and local sales taxes instead of state and local income taxes (Schedule A).
  • Deduction for mortgage insurance premiums (Schedule A).
  • Exclusion from income of qualified charitable distributions.

Expired tax benefits. The first-time homebuyer credit has expired. It cannot be claimed on the 2012 return. That is why line 67 is shown as “Reserved.”

The adoption credit stopped being refundable at the end of 2011. That is why line 71, box b, is shown as “Reserved.” A taxpayer can claim the adoption credit on line 53.

Identity protection personal identification number (IP PIN). A taxpayer who received an IP PIN from IRS should follow the instructions for line 77 on how to use it.

Mailing return. A taxpayer who is filing a paper return may be mailing it to a different address this year because IRS has changed the filing location for several areas.

Form 1040—U.S. Individual Income Tax Return—Gross Income

Line 15. IRA distributions and Line 16. Pensions and annuities. A taxpayer who converted or rolled over an amount to a Roth IRA in 2010 and chose to report the taxable amount on his 2011 and 2012 returns must report the amount that is taxable on his 2012 return on line 15b (for conversions from IRAs) or 16b (for rollovers from qualified retirement plans).

A taxpayer who rolled over an amount from a 401(k) plan or 403(b) plan to a designated Roth account and chose to report the taxable amount on his 2011 and 2012 returns must report the amount that is taxable on his 2012 return on line 16b.

Adoption exclusion. For 2012, the maximum exclusion for employer-provided adoption assistance is $12,650 per eligible child.

Form 1040—U.S. Individual Income Tax Return—Adjusted Gross Income

Line 26. Moving expenses. The 2012 standard mileage rate for moving expenses is 23¢ per mile.

Line 32. IRA deduction. A taxpayer may be able to take an IRA deduction if he was covered by a retirement plan and his 2012 modified AGI is less than $68,000 ($112,000 if married filing jointly or qualifying widow(er)). If the taxpayer’s spouse was covered by a retirement plan, but the taxpayer was not, he may be able to take an IRA deduction if his 2012 modified AGI is less than $183,000.

Form 1040—U.S. Individual Income Tax Return—Tax and Credits

Line 40. Itemized deductions or standard deduction. For 2012, the standard deduction is $5,950 for single filers and for married persons filing separately, $11,900 for joint filers and qualifying widow(er)s, and $8,700 for heads of household.

Line 42. Exemptions. The amount for each exemption for 2012 is $3,800.

Line 45. Alternative minimum tax. Under Code Sec. 55(d), the AMT exemption amount for 2012 is $50,600 ($78,750 if married filing jointly or a qualifying widow(er); $39,375 if married filing separately).

Line 53. Other credits. For 2012, the maximum adoption credit is $12,650 per eligible child for both non-special needs adoptions and special needs adoptions and the adoption credit is no longer refundable.

Form 1040—U.S. Individual Income Tax Return—Other Taxes

Line 56. Self-employment tax. Maximum amount of self-employment income subject to FICA tax is $110,100; no ceiling on Medicare wage base.

The self-employment tax rate is 13.3%.

An individual may use the farm optional method only if (a) his gross farm income was not more than $6,780 or (b) his net farm profits were less than $4,894. Using this method, farm self-employment earnings equals the smaller of (1) two-thirds of gross farm income, or (2) $4,520.

An individual may use the nonfarm optional method only if (a) his net nonfarm profits were less than $4,894 and also less than 72.189% of his gross nonfarm income and (b) he had net earnings from self-employment of at least $400 in 2 of the prior 3 years. Individuals may compute their self-employment earnings as the smaller of two-thirds of gross nonfarm income or $4,520.

A self-employed individual with both farm and nonfarm incomes is allowed to use both optional computation methods if the farm income qualifies for the farm optional method and the nonfarm income qualifies for the nonfarm optional method. If both optional methods are used to compute net earnings from self-employment, the maximum combined total net earnings from self-employment for any tax year can’t be more than $4,520.

Form 1040—U.S. Individual Income Tax Return—Payments

Line 64. Earned income credit (EIC). The maximum credit is higher, and the AGI-based phaseout figures are revised.

Line 65. Additional child tax credit. Use Schedule 8812 to figure the additional child tax credit for 2012. Schedule 8812 is new for 2012. Form 8812 is no longer in use.

Line 69. Excess social security and RRTA tax withheld. Maximum Social Security (OASDI) tax for 2012 is $4,624.20 (computed on the first $110,100 of wages) for purposes of credit for excess tax withheld.

I hope this was helpful to you!!!  We are again accepting new tax clients. Call 602-292-2009 today!

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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