The IRS has announced some taxpayers will receive their refunds about a week later than originally projected. “The one-week delay for some refunds relates to fine-tuning IRS systems to adjust for new safeguards put in place this tax season to provide stronger protection against refund fraud,” the agency explained.
What’s New in IRAs? Not Much
January 3, 2012by Kaye Thomas
The IRS came out with its annual edition of Publication 590, Individual Retirement Arrangements (IRAs), earlier than usual this year (click here for PDF). Most likely that’s because so few revisions were needed from the previous year. Sections describing what’s new for 2011, and for 2012, offer little more than a mention of the new figures for items that are adjusted annually for inflation. (These figures are available in our Reference Room.)
Taxpayers and return preparers should take note of one item affecting returs for 2011 and 2012, however. A special rule for Roth conversions in 2010 allowed the income from the conversion to be reported half in 2011 and half in 2012. You could also choose to report the conversion income on your 2010 return, but if you didn’t make that choice, you begin to pay the piper on your 2011 income tax return.
This rule applied only for Roth conversions that took place in 2010. If you did a Roth conversion in 2011, you have to report the income on your 2011 tax return.
Registered Return Preparer Exams
November 23, 2011by Kaye Thomas
The IRS is gearing up a program under which paid return preparers must meet certain requirements, including passing a competency exam, unless they hold certain credentials (for example, attorneys, CPAs and enrolled agents). The deadline for passing the exam is December 31, 2013. According to an information sheet released by the IRS, the 2½-hour exam includes multiple choice and true-false questions, and will be administered at Prometric testing centers at a fee of $116. Those who fail the exam can take it again without limit but the fee applies to each sitting. Participants will not be permitted to bring materials into the exam but will have access to Form 1040 and Publication 17.
Comment: Although access to these items may seem to make the exam quite easy, it makes sense to allow them because in actual practice return preparers can refer to these items.
Details on the IRS program are available in their guide to PTIN requirements.
2012 Inflation Adjustments
November 12, 2011by Kaye Thomas
Our Reference Room now reflects updated tax figures. Visit for the new tax rate schedules, personal exemptions, retirement plan limitations and other numbers used in calculating federal taxes.
First Deadline Under New Estate Tax Rules
October 3, 2011by Kaye Thomas
Estate tax returns are due nine months after the death of the decedent. That means today is the first deadline to fall under the estate tax rules that took effect as of 2011. Estates can obtain an automatic six-month extension by filing Form 4768 (PDF). The deadline is notable because the new rules for the first time permit an election to transfer the unused portion of the decedent’s exclusion amount ($5 million for 2012) to the decedent’s spouse. The IRS says the election can only be made by filing an estate tax return, even if the return is not otherwise required to be filed.
Patent Absurdity Comes to an End
September 9, 2011by Kaye Thomas
In yesterday’s address on jobs creation President Obama mentioned patent legislation that has just passed. Among other provisions, the new law prevents the grant of future tax patents. These patents have been heavily criticized for carving out tax-saving techniques that cannot be used without paying royalties to the patent holder. Another concern has been the notion that in granting a patent, the government implicitly approves of a technique that may not hold up in court. The legislation does not prevent the patenting of technology for preparing tax returns or managing finances, but no further patents that restrict the ability of taxpayers to use tax-saving techniques, or advisors to recommend such techniques, will be granted.
The legislation applies to any patent issued on or after the date President Obama signs the law, including currently pending patent applications. It does not affect tax patents that have already been granted, however.
Return Preparer Exam Specifications
September 7, 2011by Kaye Thomas
The IRS is gearing up to impose a testing requirement on tax return preparers who lack the professional qualifications of CPAs, attorneys and enrolled agents. Those who are anticipating the need to take this exam may be interested in the specifications released by the IRS (PDF). The document lists the areas to be tested, the weights given to each area, subject matter covered within each area, and source documents for relevant information (such as IRS publications, return instructions, and Circular 230).
For the most part this document includes pretty much what you would expect. One small surprise is the inclusion of alternative minimum tax (“AMT”). Apparently the powers that be decided you aren’t competent as a return preparer unless you know the basics of this tax. Unfortunately, the IRS has never seen fit to release a publication describing how the AMT works, so the only official reference they can offer for learning about it is Form 6251 and instructions.
Our free online guide to AMT offers an overview of how this tax works.
Option Leverage
September 6, 2011by Kaye Thomas
Leverage is a key concept in investing, and one that has special application to stock options. If you’ve received options as part of your compensation, you’ll want to understand how leverage affects your profit. Read the rest of this entry »
AMT Patch Needed for 2012
August 24, 2011by Kaye Thomas
A new report from the Congressional Research Service highlights the need for legislative action on the alternative minimum tax (“AMT”). Without a change in the law, some 34 million taxpayers will incur this tax in 2012. Read the rest of this entry »
Erroneous Disallowance of Homebuyer Credit
August 17, 2011by Kaye Thomas
A report in Tax Notes indicates numerous taxpayers who claimed the original version of the first-time homebuyer credit have received (or will receive) erroneous letters telling them they don’t qualify for the credit. The IRS is aware of the problem and working on a correction.
