Status of Federal Tax Provisions Not Applicable for 2012 Tax Returns

As we informed you in May 2012, the “Extender” tax provisions expired at the end of 2011 and, as of right now, they are not applicable to 2012 Federal returns.

At the present time it is not clear when Congress will take action on the expired provisions. Since the Extender provisions are closely tied to “Bush Era Tax Cut” provisions (which expire at the end of 2012) including the automatic budget cuts (Sequestration) and the extension of the debt limit, it appears that the earliest they will be acted upon is late December 2012.

A total of 58 individual and business Federal tax provisions expired at the end of 2011. What follows is a list of the expired or changed provisions that will have the most impact to taxpayers on their 2012 Federal returns if they are not extended.

Provisions no longer applicable for Tax Year 2012 returns:

• $250 Educator Expense Deduction – Form 1040, line 23
• Tuition and Fees Deduction – Form 8917 and Form 1040, line 34
• Read more

Provisions that changed significantly for Tax Year 2012 returns:

• Alternative Minimum Tax (AMT) exemption amounts revert to what they were in Tax Year 2000
• Maximum Section 179 Deduction amount has been reduced to $139,000 for 2012
• Read more

Click here to read the entire CrossLink Tax Update that includes further information on Federal Tax Provisions not applicable for 2012 tax returns.

IRS Update: IRS EITC Preparer Compliance Update

The IRS is making changes to their ongoing EITC compliance efforts for the upcoming year. Beginning this month (October 2012), EITC return preparers that have been identified by the IRS as “at risk” for filing returns with EITC errors will receive compliance letters, educational visits, or be subject to a due diligence audit.

The IRS uses a risk-based scoring model to determine which preparers of EITC returns warrant one of the following types of actions from the IRS:

• Soft Compliance Letter - During October 2012 and November 2012 the IRS will be mailing 3,000 compliance letters to new and low-to-medium risk EITC preparers. Read More
• Knock and Talk (Educational Visit) - During December 2012, the IRS will conduct 100 educational visits to preparers whom the IRS has identified as filing highly questionable Tax Year 2011 EITC returns. Read More
• Due Diligence Audit Visit - Due diligence audits are performed on preparers whom the IRS has identified as being at the highest risk of preparing questionable EITC returns. Read More

Click here to read the entire CrossLink Tax Update that includes further information on IRS EITC Preparer Compliance.

IRS Identity Protection PIN

The IRS is expanding the number of taxpayers who will receive an Identity Protection Pin (IP PIN) for the upcoming season. All taxpayers that have had an identity theft indicator applied to their IRS tax account will receive an IP PIN that must be included on their 2012 Federal income tax return. This means that approximately 600,000 taxpayers will receive an IP PIN for the upcoming filing season.

The affected taxpayers will receive their IP PIN in a notice (Notice CP01A) from the IRS in December 2012. This notice will include their 6-digit IP PIN and information on the use of the IP PIN.

If you know that any of your customers have been the victim of identity theft you may want to inform them that they will be receiving this notice in December. They will need to keep it and bring it in with the rest of their tax information when they come to have their 2012 income tax return prepared.

Other changes to the IP PIN program that you need to know:

• If the taxpayer was issued an IP PIN they must include it and have it entered correctly on their 2012 Federal return or the IRS will reject their return. The inclusion of the IP PIN will allow the return to be processed normally and will not delay their refund.
• If the taxpayer loses the notice that includes their IP PIN they can call the IRS Help Desk. Once they have authenticated who they are, they will be issued with a replacement IP PIN.
• Click here to read more.

Click here to read the entire CrossLink Tax Update that includes further information on the IRS Identity Protection PIN.

Last Day to e-File Tax Year 2011 Returns

This is a reminder that the IRS will be shutting down the e-File system this Friday, October 19, 2012.In order to ensure that you receive your acknowledgement by Friday, be sure that you transmit any remaining Tax Year 2011 returns by tomorrow, October 18.

Any Tax Year 2011 returns that are not e-Filed by October 18 will be refused by Central Site and will need to be filed by paper for the remainder of 2012.