TOLEDO, Oh. - For those who complain that America's federal income tax system is too complex, take heart. There are only a handful of things that taxpayers need take note of as they prepare for the upcoming April 15 tax filing deadline.
"There really weren't many changes," said tax attorney Chuck Mira, a partner with the firm of Mira + Kolena in Toledo, Ohio.
The standard deduction for those who don't itemize their taxes increased for singles or marrieds filing separately by $150 to $5,950, and for married taxpayers filling jointly by $350 to $11,950. The deduction for the head of a household rose by $200 to $8,700. Personal and dependent exemptions have risen by $100 to $3,800.
There were a few specific credits in 2012 that some taxpayers will find useful.
The so-called "Saver's Credit" provides a credit of $1,000 ($2,000 for couples filing jointly) for taxpayers who voluntarily contribute to a sanctioned retirement account, such as an IRA, 401(k), or other workplace retirement account. The credit, designed for low and moderate-income workers, is limited to taxpayers whose 2012 adjusted gross income was no more than $57,500 for marrieds filing jointly, $28,750 for singles or marrieds filing separately, or $43,125 for the head of a household.
The credit helps offset part of the first $2,000 workers voluntarily contribute to their retirement accounts. Also, the IRS gives eligible taxpayers until April 15 to set up a new individual retirement arrangement or add money to an existing IRA and still get credit on the 2012 return.
Last year was to be the final year for the American Opportunity Tax Credit, which helps offset college costs. But the credit was extended to 2017 and now uses a redesigned Form 8863 to better verify a student's eligibility.
For the eco-minded, the tax code continues to offer a Plug-in Electric Drive Vehicle Credit. First offered in 2008, it was modified for 2012 to include select two or three-wheeled electric scooters and tri-wheel vehicles. For most of the better-known electric cars, the credit is $7,500. For others the limit is $2,500.
Some additional taxes kicked in at the end of the year for higher-income people, and a higher tax bracket for those earning over $400,000 annually.
Starting Jan. 1, some taxpayers are subject to a new Additional Medicare Tax of 0.9 percent if their income exceeds $200,000 for singles or heads of households, $125,000 for marrieds filing separately or $250,000 for marrieds filing jointly. An employer must withhold the Additional Medicare Tax from wages it pays to an individual in excess of $200,000 in a calendar year.
Another new tax that began Jan. 1 is the Net Investment Income Tax that imposes a 3.8 percent tax on income derived from bonds, stocks, mutual funds, loans, and other investments; capital gains, dividends from mutual funds, and gains from the sale of stocks, bonds, mutual funds and investment real estate. The tax applies to those who have net investment income plus adjusted gross incomes of $200,000 for singles or heads of households, $125,000 for marrieds filing separately, and $250,000 for marrieds filing jointly.
A tax bracket of 39.6 percent has been established for singles with incomes over $400,000, heads of households with incomes over $425,000, marrieds filing separately with incomes over $225,000, and marrieds filing jointly with incomes over $450,000.
The tax rate for capital gains and dividends, which was 15 percent in both 2011 and 2012, is at 20 percent as of Jan. 1.
While the tax code itself did not change much in 2012, many of the forms used for filing taxes this season did change, creating a delay in when the IRS started accepting tax returns for processing.
It was only March 4 that the IRS announced that it had updated its tax-processing systems to allow all remaining individuals and business taxpayers to file their returns. The IRS had been accepting 2012 returns in phases, starting Jan. 30, while it updated various forms and instructions to comply with late changes made by Congress. Taxpayers whose returns used forms in the process of being updated, such as Form 5695, which governs residential-energy credits, had to wait until March 4 to file.
"The thing that complicated matters is they just came out last week and said all the forms are finally ready," Mira said. "That put us a little bit behind the eight ball."
(Reach John Chavez at firstname.lastname@example.org . Distributed by Scripps Howard News Service)
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