A software bug is preventing the IRS from accepting electronically filed returns if the taxpayer (or taxpayer’s spouse) is age 64 and the return claims the earned income credit. The IRS says the glitch will be corrected by 6:00 pm February 14.
Archive for January, 2011
Bug Affects Tax Filing for Some Age 64
Monday, January 31st, 2011Valentine from IRS: Season to Open for Itemizers
Thursday, January 20th, 2011The income tax filing season is open for most taxpayers, but delayed for some (including all who claim itemized deductions) because Congress changed the tax law so late in the year. The IRS has announced (PDF) that it will accept returns from taxpayers affected by the delay beginning February 14.
FICA Tax Prescribed for Medical Residents
Wednesday, January 12th, 2011In a unanimous decision, the Supreme Court has upheld a Treasury regulation requiring medical residents to pay FICA tax. This tax, used to fund Social Security benefits, provides an exemption for amounts received by students for work that is incidental to their studies. The regulation says this exemption does not apply to the services of a full-time employee normally scheduled to work 40 hours or more per week. Medical residents typically spend more than 40 hours per week treating patients. A District Court ruling held the regulation invalid but was reversed on appeal, and the Supreme Court has put the issue to rest: full-time work does not qualify for the student exemption.
Fairmark Wrapup
Monday, January 10th, 2011Here’s a summary of the top news, features and other items of interest relating to taxes and investing published recently at Fairmark.com.
The Fairmark Wrapup is also published as a free email newsletter. Click here to sign up.
Managing Income from a Roth Conversion
Monday, January 10th, 2011People who did Roth conversions in 2010 now face the issue of how to manage the resulting income. With the Bush tax cuts having been extended through 2012, many will want to take advantage of a special rule, which applies only to 2010 conversions, allowing half the income to be taxed on their 2011 return and half on their 2012 return. This isn’t the optimal approach for all people, however. If you did a Roth conversion in 2010 and don’t want the income to be taxed in this manner, there are four ways to get a different result. (more…)
Life Insurance Loan Turns to Tax Debt
Wednesday, January 5th, 2011If you own a permanent life insurance policy (“whole life”), you may be able to borrow against the cash value. These loans are secured by your ownership interest in the policy, so they may carry a relatively low rate of interest. What’s more, generally you aren’t required to repay these loans according to a fixed schedule. Interest that accrues without being paid is simply added to the amount of your loan balance. If you don’t pay attention, though, you can end up with an unexpected tax bill. (more…)
Tax Deadline: Outlook Three Days Off
Wednesday, January 5th, 2011Microsoft Outlook offers a way to automatically insert holidays and other events in the calendar. If you’ve done this, your version may say (as ours does) that April 15, 2011 is “Tax Day” in the U.S. Not true! Emancipation Day, a holiday in the District of Columbia, falls on April 15 this year, and that means IRS deadlines that would otherwise fall on that date are delayed until Monday, April 18.
The delayed deadline applies to Form 1040, filing for an extension, first quarter estimates, IRA contributions for 2010, and any other federal tax item that would normally have an April 15 deadline. If filing a state return, check to see whether your state recognizes this extension.
Mom Pays, Daughter Deducts
Tuesday, January 4th, 2011What happens when one person has a deductible expense, and someone else pays it? Suppose, for example, a mother covers medical expenses and real estate tax for her daughter. That’s what happened in a recent Tax Court case (Lang) (PDF). (more…)
Fairmark Wrapup
Monday, January 3rd, 2011Here’s a summary of the top news, features and other items of interest relating to taxes and investing published recently at Fairmark.com.
The Fairmark Wrapup is also published as a free email newsletter. Click here to sign up.
RALs Blocked at Block
Monday, January 3rd, 2011H&R Block has announced it won’t offer refund anticipation loans this year. RALs have been criticized for imposing high costs on consumers while providing little benefit. H&R Block’s action was based on loss of their funding arrangement, however, rather than ethical concerns.
Jackson Hewitt and Liberty Tax Service intend to continue offering the controversial loans.
