The statement from the Internal Revenue Service (IRS) last week was short and to the point.
“The IRS is currently reviewing the details of this week's tax legislation and assessing what impact it will have on this year's filing season,” the statement read. “The IRS will soon make available additional information on when taxpayers can start filing 2012 tax returns.”
The last-minute fiscal cliff legislation did more than keep world financial markets on the edge of their seats; it's also held up the IRS as it prepares to start receiving 2012.
But how could tax legislation that affects the future have any bearing on 2012 taxes? Because a few other items were slipped into the fiscal cliff bill. Some of those items have a retroactive start date, meaning they will affect the 2012 tax year.
For example, if you were unfortunate enough in 2011 to pay the alternative minimum tax (AMT) there's a chance you can avoid it in 2012. The tax, which was devised to make sure high income earners paid at least some tax, was never indexed for inflation. Each year more and more people found themselves paying it.
Included in the January 1 tax bill is a fix to the AMT law, raising the threshold. Millions of people who would have paid it now will not. For the IRS, that means reprinting some tax forms.
Another retroactive tax break is a broadening of the tax break for people who ride mass transit. The measure increases the tax break for commuters and makes it retroactive for 2012. That, too, requires some form changes.
Some expired tax deductions have been brought back to life and made retroactive to last year. If you are a teacher and spend some of your own money for school supplies, that deduction is returning, allowing you to write off up to $250. Tuition and fee deductions will also be available to 2012 filers.
Now is the time to prepare
While the IRS gets its duck in a row, tax filers should as well. You probably won't receive W-2 or 1099 forms until the end of January but you can spend the time gathering receipts and putting together an income statement.
If you don't already have someone to do your taxes you can begin looking around for a tax preparer. Ask relatives and friends for a referral and try to find someone who has been working in your community for a while and will probably be around for a few more years. The more familiar your preparer becomes with your situation the better job she can do for you. In this case, consistency can work in your favor.
If you are eager to get your hands on your refunds, bypass the refund anticipation loans (RAL) and instead file early and electronically. Those who do stand a good chance of getting their refunds within two weeks.