By Teresa McUsic
Tax filing season is up and running and local CPAs are offering advice on what to be sure to watch out for. Here are some tips for those who have yet to file.
- Don’t forget to deduct PMI. Private mortgage insurance, used when a home buyer does not have all of the required down payment, can be deducted from your federal taxes, according to Kevin Gilbreath, with Dixon Hughes Goodman. PMI is generally not reported on your 1098 mortgage tax form, so you must find out from your mortgage company how much of your monthly escrowed payment is PMI to deduct it.
- If you have an oil and gas lease, remember the 15 percent depreciation deduction. There may be other deductions you can take as well, said Lacey Riley, CPA-Flower Mound. Look for them on the 1099 form that will come from the gas company. Be sure to check the back of that form for possible expenses that can be deducted.
- If you are waiting for a 1099 from your broker, but have gone paperless, you may have to check your online account to get the information, said Sheila Owens with Thomson Reuters. The forms should have been sent out in the mail by Feb. 15.
Filers still have a couple of ways to lower their tax bills for 2012, according to the CPAs.
You can put money into an individual retirement account or health savings account until April 15. The contributions can then be deducted from your gross earnings, lowering your tax bill.
The limit on a traditional IRA contribution for 2012 tax filing is $5,000 ($6,000 if you are age 50 or older.) For a Health Savings Accounts, which are only for people with high-deductible health plans, you can contribute up to $3,100 for an individual or up to $6,250 for a family for 2012.
The American Tax Relief Act (ATRA), passed in early January by Congress, includes a number of renewed credits and deductions tax filers can use for 2012. Among them:
- Sales Tax deduction. Texans and other states with no income tax will be able to deduct sales tax from their taxes if they itemize (instead of taking the standard deduction) in 2012 and 2013. Don’t forget to add sales tax from purchase of a new car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, off-road vehicle, plane, boat or mobile or prefabricated home or home building materials. Finally, add in your local sales tax to the state sales tax tables to get the full deduction.
- Energy savings home improvement and electric car credits. The credit is for 10 percent of the cost of qualified energy efficiency improvements, including adding insulation, energy-efficient exterior windows and doors and certain roofs. Adding a high-efficiency heating and air condition system, water heater or stove that burns biomass fuel also qualifies for the credit. The credit has a lifetime limit of $500 and was extended for purchases in 2012 and 2013. Be sure to keep a copy of the Manufacturer's Certification Statement and any receipts or itemized bills.
Also, the Residential Energy Efficient Property Credit was renewed and is for up to 30 percent of the cost for a solar electric system, solar hot water heater, geothermal heat pump, wind turbine or fuel cell property. It is in place through 2016. In addition, there is a credit for buying an electric, lean burn or fuel cell vehicle was also extended through 2016. For more information on these credits, log on to www.energytaxincentives.org.
- Educator Expense Deduction – Teachers can deduct up to $250 in classroom expenses for supplies, materials, books and software. The bill extends this tax break to teachers for the next two years.
- Tuition and Fees Deduction – College students or parents of students can continue to deduct education expenses related to schooling, including tuition, books and other supplies up to $4,000 this year.
The IRS also has announced major initiative including arrests and indictments to curb the increasing problem of identity theft of tax refunds.
In addition to a guilty plea and grand jury indictment in Dallas in January related to tax ID fraud, several undisclosed enforcement actions by the IRS and Justice Department took place in Arlington and Grand Prairie in a national sweep against 389 identity theft suspects led to 734 enforcement actions. Among the actions were 109 arrests, 189 indictments, 47 search warrants, as well as gathering case information and checking out complaints.
“It’s one of the biggest challenges facing the IRS today,” said Steve T. Miller, acting IRS commissioner, in a conference call to reporters. “We’re doing a much better job on all fronts, but we still have a lot of work to do.”
Miller said he did not know how much taxpayer money has been lost to identity thieves grabbing refunds before their rightful owners, but that the agency prevented $20 billion from 5 million returns being released in 2012, up from $14 billion in 2011.
Also, the number of taxpayer ID victims needing a personal identification number (PIN) to file has grown from 250,000 in 2012 to 770,000 in 2013, Miller said. Other victims include those who don’t file, such as children or dead people.
Wait time to resolve a typical case is around four months, said Clay Sanford, Dallas IRS spokesman. The agency is working to reduce that time, he said.
“The IRS continues to put more and more employees on resolution of victim cases,” he said. “These are extremely complex cases to resolve, frequently touching on multiple issues and multiple tax years.”
The penalty for such ID theft is tough once caught and tried, with the average jail time running four years, but going up to 20 years, Miller said. For example, last July in Fort Worth, Youlanda Rochelle Wright was sentenced to 78 months in prison and ordered to pay $166,384 in restitution after pleading guilty to file tax returns in customer’s names from a call center where she worked to claim refunds, according to the IRS.
Teresa McUsic can be reached at TMcUsic@SavvyConsumer.net