As the new year is upon us, we now find ourselves having to deal with the yearly task of filing tax returns. Tax preperation companies have already opened their doors to clients and on January 14 the IRS will begin accepting tax returns for most taxpayers. Due to some 2010 tax law changes that were passed in December, however, many people will find themselves unable to file their returns until mid-to-late February.
With that news also came news of the extension of the tax deadline to April 18 due to Emancipation Day, a holiday observed in the District of Columbia. Deadlines with the IRS are impacted by District of Columbia holidays, so those who normally wait until the last date for filing tax returns, usually April 15, will find themselves with a few extra days. Those who request an extension on their federal tax returns this year will have until October 17.
New Tax Law Changes for 2011 Will Delay Tax Filing for Some People
Because new tax laws were just passed in December, the IRS now needs time to update its processing systems. Those who will be impacted by these delays are taxpayers claiming itemized deductions on Schedule A and those claiming the Higher Education Tuition and Fees Deduction or the Educator Expense Deduction. Any taxpayer claiming these deductions, whether by paper or electronic filing, will have to wait until the IRS has reprogrammed its systems to process those returns.
The reason for these delays is that the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act has extended these, and other deductions, for the 2010 tax season as well as for 2011. Other 2011 tax law changes will not affect this year's income tax returns, but will be in place for next year.
The IRS has yet to release the exact date when they will be able to accept the returns impacted by the federal tax law changes. They are encouraging taxpayers to use e-file instead of paper returns, in order to "minimize confusion over the recent tax law changes and ensure accurate tax returns," according to irs.gov.
New IRS Regulations Will Impact Tax Preparers and Those Seeking Instant Refunds
According to the filing statistics released by the IRS, nearly two-thirds of US taxpayers use tax professionals when filing their income tax returns. Starting this year, they can feel more comfortable doing so since the IRS has increased the standards for tax preparers and is requiring a mandatory Preparer Tax Identification Number (PTIN). This is part of an overall commitment by the IRS to ensure accurate federal income tax returns. In addition to the PTIN, the IRS is also requiring tax preparers and firms who process a large number of returns to e-file. Beginning January 1, 2011 any tax preparer or firm who processes 100 or more returns per year must e-file. In 2012, that number is decreased to 11 returns.
Another IRS regulation that is going to affect millions of people is that in order to protect private information, the IRS will no longer provide a debt indicator to lenders. Reporting on whether an individual had any debt with the federal government through back taxes or child support, the debt indicator was the primary factor in the past for anyone seeking a Refund Anticipation Loan (RAL) for a fast income tax refund. With the debt indicator gone, now lenders must rely on credit when processing a RAL. This means that many who received RALs in the past for an immediate income tax refund, will not get one this year.
Furthermore, the Office of the Comptroller of the Currency (OCC), the governing body of nationwide financial institutions, has prohibited RAL's from being issued by HSBC bank, which has funded RALs for leading tax preparation agency H & R Block for years. Competitor agencies Jackson Hewitt and Liberty Tax Service, as well as others, will still be providing RAL's through Republic Bank & Trust. Because Republic is a state bank and governed by the Federal Deposit Insurance Corporation (FDIC), the ruling by the OCC does not affect them.
Due to the fact that RALs are now based on a credit report and not a debt indicator, this means that approval rates will plummet. Because many people relied on them for an instant money tax refund, which they may not be able to get approved for this year, there will be many disappointed taxpayers. H & R Block has also met with the challenge, despite the last minute ruling by the OCC They will still have an instant loan product, though it will be separate from any tax preparation, unlike the RALs offered by competitors. It is widely believed that RALs will be completely eliminated for next year's tax season.
Keep Informed To Avoid Surprises
With all of the changes for the tax season this year, it is advisable to do your research. Whether preparing your own taxes or having someone do it for you, remember to keep on top of the tax law changes affecting you. If you are unsure about how they will impact you, feel free to call your tax preparer or visit irs.gov, which has an abundance of information. Once you have filed your taxes, you will also want to keep abreast of your income tax refund status, which you can also do at the IRS web site.
Patrick Hamlin - Patrick is an aspiring author who has a passion for knowledge and sharing what he has learned. He has found himself living in several ...
