SAN FRANCISCO (MarketWatch) — Your 2010 return is less complicated than it might have been, thanks to the Tax Relief Act in December, but there are changes that could trip you up.
Lawmakers’ agreement to extend the Bush-era tax cuts means many of the tax provisions you’ve come to know and love are still in place — and the Form 1040 is similar to last year.
More time to file, and other tips
E-file is officially open on IRS.gov, but some taxpayers face a delay. Meanwhile, April 18 is the filing deadline this year, and a consumer group warns taxpayers to keep track of Forms 1099, because ID thieves are hankering after those.
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/conga/personal-finance/taxes_seo.html 122792 But there’s bad news for some taxpayers. For instance, in 2009 unemployed workers could exclude up to $2,400 of unemployment benefits from income; that provision did not get extended for 2010, said Steve Henley, national tax practice leader with CBIZ MHM, in Atlanta.
“For some reason, they decided not to extend that,” he said. “That’s probably a little bit of a surprise for some taxpayers.”
Other tax breaks are gone, too, such as the three extra standard deductions — for real-estate taxes, taxes on a new-car purchase and disaster losses — that non-itemizers could use to lower their bill in 2009.
Still, other than the disappearance of Line 40b to claim those extra standard deductions, Form 1040 is essentially the same as last year.
“Because Congress acted at the end of the year to extend a whole bunch of stuff that was ready to expire, [the changes are] not quite as bad this year as in past years,” said Mark Luscombe, principal tax analyst with CCH Inc., a Riverwoods, Ill.-based tax publisher and unit of Wolters Kluwer.
But lawmakers acted so late in 2010 that the IRS is still reworking some of its processing systems; that means people who itemize must wait until Feb. 14 or later to file (though you can still prepare your return now).
The Tax Relief Act, among other perks, resuscitated the deduction for state and local sales taxes — a boon to taxpayers in income-tax-free states — and the above-the-line deductions both for student tuition and fees, up to $4,000, and for teachers’ classroom expenses up to $250.
And, for high-income filers, the new law extends through 2012 the Bush-era provision repealing the income limits on itemized deductions and personal exemptions. Before, taxpayers above certain income levels lost part or all of their exemptions and itemized deductions. Those limits were slowly phased out; 2010 is the first year they’re gone completely (separate income limits still apply on some deductions).
Plus, Congress extended the alternative-minimum-tax patch, preventing millions of taxpayers from losing access to a number of tax breaks under that parallel system.
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