Let me start by saying that tax filings are a necessary evil. While you may just want to sweep the entire thought of your tax return under the carpet, my advice is: don’t.
With the adage “pay me now, or pay me later” in mind, many folks procrastinate on filing their tax returns with the thought that paying later is the lesser of two evils. I hate to remind you folks, but income taxes are a pay-as-you-go proposition.
Considering the complexities of the United States income-tax code, there are innumerable situations where an extension to file makes sense. Just be sure the check is in the mail before heading off for vacation. Filing a tax extension provides additional time to file income-tax returns, but does not extend the due date for payment of income taxes without running the risk of incurring penalties and/or interest. (And really, who wants to pay Uncle Sam any more than absolutely necessary?)
Whether you plan to file now or file later, unraveling the tax story can be a challenge. Here are a few items to note when trying to make sense of your tax liability.
In the “good news” category:
• Legislation has extended many benefits, including the American Opportunity Credit for parents and students and the expanded Earned Income Credit.
• Standard mileage rates for business use of your personal vehicle increased to 55 cents per mile for miles driven after June 31, 2011. The rates for miles traveled for medical purposes have also increased from 2010 levels.
• The exemption amount increased to $3,700.
• AMT (Alternative Minimum Tax) exemption amounts have increased slightly.
• Schedule L has disappeared (like anyone remembered it in the first place).
• The Health Coverage Tax Credit still exists.
• Certain energy-saving home improvements may qualify for a limited nonbusiness energ property credit.
• Income limitations do not apply to rollovers or conversions to Roth IRAs.
On the down side:
• A new Form 8949 must be used to report certain Schedule D transactions.
• Repayment of the First-Time Home Buyers Tax Credit may or may not require Form 5405 (more potential confusion).
• The deduction for self-employed health insurance is no longer allowed on Schedule SE when computing tax from self-employment.
• Distributions from HSAs (health savings accounts) not used for qualified expenses carry tax at an increased rate.
• Form 8938 must be used by taxpayers to report specified foreign financial assets.
• It is time to pay the piper for certain ROTH IRA rollovers taken during 2010.
• The Making Work Pay tax credit has expired.
• The rate for using a car to provide services to charitable organizations remains at 14 cents per mile.
On a final note, the due date to file Federal Form 1040 is April 17 this year, two days later than the traditional April 15 deadline. April 17 is also the date when payments normally due on April 15 are due. Depending on your place of residence and filing site, your state return and/or payment may be due on April 17.
Whether filing a return or seeking an extension, be sure to check in with your CPA to make sure you have a handle on all the filing particulars and to discuss the specifics of your tax situation.
Gail Kinsella is a partner in the accounting firm of Testone, Marshall & Discenza, LLP. Contact Kinsella at email@example.com